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Week In Review


Nonfarm payrolls increased by 148,000 jobs in December, well below the consensus estimates of 190,000. The unemployment rate was unchanged at 4.1%. Average hourly earnings rose 0.3% while the average workweek was unchanged at 34.5 hours. The labor force participation rate, 62.7%, was also unchanged.

Our Take

Future economic growth depends in part on income, which drives spending. Obviously, total income affected by both hiring and wage growth. While the headline payroll increase in December was weak, manufacturing jobs increased more than expected while retail suffered. Wage growth came in as expected, yet remained relatively stagnant. A solid mix of stronger job creation in higher paying sectors along with increased wage growth would be welcome. Unfortunately, we are not quite there yet.


Congress passed, and President Trump signed into law, a tax reform bill. On the corporate side the new law lowers the corporate income tax rate and moves to a territorial tax system. On the individual side the law reduces tax rates, eliminates or limits some common itemized deductions, increases the standard deduction, increases the AMT threshold and doubles the estate tax exemption. The CBO scored the new law as increasing deficits by $1.5 trillion over ten years.

Our Take

In general, lowering tax rates and broadening the tax base result in less distortions in the economy and better growth over the long run. Making the U.S. a more competitive tax jurisdiction should also incent more investment in the U.S. However, the greatly increased deficits risk pushing the debt levels to a point that indebtedness becomes a drag on growth. Also, the changes on the individual side are much more at the margins rather than radical reform.


State and local governments issued $60 billion of municipal bonds in December. This marks the largest amount of new issuance since 1985 when $54.7 was issued according to Bloomberg. In 2017, over $409 billion of municipal bonds were issued, slightly lower than 2016’s issuance.

Our Take

Municipal issuers raced to market at the end of 2017 in order to issue debt before any changes to the tax code took effect. January issuance is expected to be significantly slower as only $5.6 billion of municipal bond sales have been announced.