With the intense focus of many interested in economic fundamentals being on Brexit and what Gibbons would surely have dubbed “The decline and fall of the Pound Sterling”, one could be forgiven for forgetting that next month will see the US Presidential election.
The main choice facing the US electorate is between Democrat, Hillary Clinton and Republican, Donald Trump. You may feel that the choice comes down to somebody who boasts of his Neanderthal sexual seduction technique of women or somebody whose husband was impeached for lying to the US parliament about an extramarital affair, but then you’d be playing into Trump’s hands. Trump will have a hard time winning the election on merit and can only play the populist card and hope that Western disaffection with politics and politicians is enough for him to carry the day against an establishment figure. We will see.
However, as Mrs Clinton’s husband put it in the 1992 Presidential election campaign “It’s the economy, stupid”. The current incumbent, Barack Obama, is a Democrat at the end of his two-term maximum occupation of the White House; he came to power at the height of the Global Financial Crisis. The success of Mrs Clinton, should it happen, will be in no small part due to the perceived economic state of the nation.
The September job creation figure came in at 156000 jobs which is significantly lower than the average monthly job creation figure of 180000. Unemployment drifted up from 4.9% to 5%, but it is still close to the level seen as being “full employment”, so at that point job creation is likely to taper off to a lower number anyway. With this said, the job creation figure is unlikely to be an obstacle to the Federal Reserve raising interest rates before the end of the year. It will be remembered that when the rate was increased in December 2015, the plan called for four 0.25% hikes over the course of 2016 – in the event, the rate has been held since its initial rise. The Fed still wants to re-arm itself against inflation and this can best be achieved by normalising interest rates over time, so a first 2016 hike is surely still odds-on.