The Supreme Court is potentially expected to issue a ruling today that could potentially reshape the President’s trade agenda. At issue is the scope of presidential authority to impose tariffs under long standing trade laws.
It is largely expected the Supreme Court will rule against the President, creating yet even more uncertainty with many believing the issues may remain tied up in court for a prolonged period of time.
Will there be any market reaction? Perhaps writing the obvious if the Supreme Court supports the Administration more than expected, volatility may rise.
Also released today in December’s unemployment data. This report is regarded as the first “clean” employment report since September. Analysts are expecting a 70k and 75k increase in nonfarm and private sector payrolls, respectively, a 0.3% increase in wages, a 34.3-hour work week, a 4.5% unemployment rate and a 62.4% labor participation rate.
Yesterday it was reported that productivity, or non-farm employee output per hour, soared at a 4.9% annualized ratee after an upwardly revised 4.1% advance in the second quarter.
Economic growth powered ahead in the third quarter by the fastest pace since 2023 despite a slowing labor market. Unit labor costs—what business pay employees to produce one unit of output—dropped 1.9% following a decrease in the prior quarter. This marked the first back-to-back decline since 2019 and is view positively.
The drop in employment costs illustrates a bifurcation in the economy, whereby the labor market has softened despite solid economic growth.
Fed officials take comfort in continued efficiency gains because they limit wage driven inflationary pressures. Labor costs are the biggest expense for many businesses, so companies turn to new technology and equipment to improve worker efficiency.
Is this data a harbinger of things to come given the massive investment in AI?
Commenting on tariffs and trade, the trade deficit unexpectedly narrowed in October to the smallest since 2009. The trade gap shrank 39% from the prior month primarily the result of a drop in pharmaceuticals imports.
There have been large monthly swings in trade this year related to the implementation of tariffs.
Trade volatility has affected GDP. Before the latest trade report, the Federal Reserve Bank of Atlanta’s GDPNow forecast suggested net exports would subtract 0.3% from fourth quarter growth, In the third quarter, trade added 1.59%.
What will happen today?
Last night the foreign markets were up. London was up 0.49%, Paris up 0.87% and Frankfurt up 0.42%. China was up 0.92%, Japan up 1.61% and Hang Seng up 0.32%.
Futures are flat after the release of the jobs data that was mixed. The unemployment rate fell however the increase in non-farm and private sector jobs disappointed with downward revisions of prior months. And then there is the potential tariff ruling. Will one occur today and what will be the reaction if a ruling is made?
The 10-year is off 4/32 to yield 4.18%, little changed from before the data was released.
