by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with concerns regarding new data on the labor market and its impact on monetary policy. Next, we give an overview of the impact that tariffs will have on domestic production with a focus on the auto industry, address US hacking accusations from China, and provide an update on the government shutdown. As always, the report includes a comprehensive roundup of key international and domestic data releases.

ADP Payrolls: According to the latest report from ADP Research, the labor market cooled last month. The payroll firm estimates that private employers cut an average of 11,250 jobs per week over the four weeks ending October 25. This weaker jobs report follows an earlier estimate showing a net gain of 42,000 positions for the month, suggesting that hiring momentum slowed notably in the latter half of the period. The weak report is likely to have an impact on monetary policy.

• The slowdown in job creation comes as the Federal Reserve continues to weigh which side of its dual mandate — maximum employment or price stability — should take priority. Following the latest FOMC meeting, a notable divide emerged among policymakers over the future direction of monetary policy. Two voting members issued opposing dissents on the 25-basis-point rate cut, where one favored leaving rates unchanged, while the other advocated for a deeper, 50-basis-point reduction.
• At the Fed’s upcoming meeting in December, policymakers may have to rely heavily on private-sector data, as government statistics for October might not be released in time. While September figures are expected to become available once agencies reopen, collecting data for October could prove far more challenging. According to White House economic advisor Kevin Hassett, the government shutdown has disrupted data collection for the month, resulting in information that may never be fully recovered.
• That said, the latest inflation data from OpenBrand — which tracks prices across marketplaces, retail websites, and brick-and-mortar stores — showed that prices for consumer durables and personal care goods decelerated for the first time in three months. While the index is not as comprehensive as the CPI, it adds to the growing evidence that inflation may no longer warrant being the central bank’s top priority, especially amid the notable slowdown in the labor market.
• In short, private-sector data on both inflation and employment may be enough to persuade Fed officials to cut rates again at their December 10 meeting. However, this could depend on whether the government manages to release official November data, as the ongoing shutdown, now extending past the data collection period, may make that difficult given the time constraints. A rate cut would likely support risk assets and put downward pressure on the dollar.

Tariffs Taking Hold: Recent reports indicate that firms are adjusting their business practices in response to tariffs. On Tuesday, it was revealed that GM has asked its suppliers to phase out parts sourced from China by 2027, to safeguard against potential geopolitical disruptions. Although the decision was made in late 2024, executives have reportedly accelerated implementation amid rising global trade tensions. The move underscores a broader industry shift from prioritizing efficiency to emphasizing resilience in supply chains.

• As discussed in our report on the “three Rs” of tariffs, the renewed focus on resiliency comes as the White House continues to wield tariffs aggressively under Section 232. The administration has used these national security provisions to push for greater domestic production. This assertive use of tariff authority is already beginning to reshape global supply chains.
• The effects of these policy shifts are beginning to surface in the auto industry, which has been a primary target of recent trade actions. Earlier this month, the administration fully implemented tariffs on medium- and heavy-duty trucks, truck parts, and buses, marking the first time this vehicle class has been subject to such measures. The policy includes a key incentive: automakers that relocate production to the US can qualify for a tariff reduction from 25% to 10%.
• While firms are rapidly adapting their supply chains to prioritize resiliency in response to trade policy, these shifts carry inherent inflationary risks. Although price pressures are not expected to reach pandemic-era highs, they are likely to remain elevated. So far, the demonstrated ability of consumers to absorb these increases has alleviated pressure on companies. We suspect that as long as this trend continues, the economy should remain resilient and provide a supportive environment for risk assets.

US Bitcoin Hack?  China has accused the US of orchestrating a cyberattack to steal billions in bitcoin. The allegation refers to a 2020 security breach that followed the US government’s seizure of cryptocurrency from Cambodian tycoon Chen Zhi, who was charged with money laundering. This claim mirrors a pattern of Chinese allegations against the US that typically lacks evidence to support American indictments. The move signals how the broader geopolitical rivalry is increasingly playing out in the domain of cybersecurity and digital assets.

Shutdown Update: The US House of Representatives is set to vote on legislation to end the government shutdown, following a key procedural victory in the House Rules Committee on Tuesday. Ending the shutdown is expected to boost equities by restoring government services and stability. Politically, the event is likely to shape the upcoming midterm elections, where affordability — driven by concerns over healthcare, tariffs, and housing costs — is set to be a central issue.

More Golden Shares? Indonesia’s sovereign wealth fund is in talks to acquire a “golden share” in the domestic operations of ride-hailing giants Grab and GoTo. This golden share would grant the fund influence over key corporate policies, such as worker pay, mirroring a recent White House decision to secure a similar share in Nippon Steel to facilitate a merger. While still in its early stages, this trend signals a potential shift away from the long-standing principle of shareholder primacy.

Oil Demand Rise: The International Energy Agency now projects rising oil demand for the next 25 years, reversing its earlier forecast of a near-term peak. This revised outlook, detailed in its latest World Energy Outlook, stems from weakened climate commitments and slower-than-expected electric vehicle adoption. Additionally, growing energy demand from advanced manufacturing and data centers has contributed to the change. The report underscores a growing divergence between climate targets and real-world trends, highlighting the political and economic challenges facing the global energy transition.

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