While we anticipated a major disruption here in the Northern Virginia area, we were largely spared its wrath.

Our thoughts go out to everyone affected by this storm. major disruption here in the Northern Virginia area, we were largely spared its wrath.

Raised in New Jersey, I know that several people from my childhood have been severely impacted.  I especially want to recognize the Frey Family who lost Tom in the storm.  Tom was a childhood friend of mine and as I understand it, was assisting neighbors with cutting down a tree when he sustained a head injury that took his life.  I will always remember jumping trash cans on our bikes and exploring the woods in a way no parent would ever let their children do in this day and age.

Given a number of issues, including the safety of employees, the New York Stock Exchange (NYSE) and related markets were closed on Monday and Tuesday, which makes this the first two-day, weather-related closure since the Blizzard of 1888 – hat-tip to CNBC for that nugget.

Here are the returns for the shortened week.

Damage

Markets re-opened on Wednesday and were greeted by an absence of drama, which came as big sigh of relief to the Exchange and investors alike.

Estimates of storm damage are in the $30-50 billion range.  Early reports suggest that refinery damage in the Northeast has been minimal and the December contract for wholesale gasoline futures traded on the CME have been relatively stable, which bodes well for consumers not directly impacted by the storm.  However, the disruptions to those who felt the full brunt of the hurricane will continue long after the headlines recede and news reports fade.

Encouraging News on the Employment Front

The Bureau of Labor Statistics reported that nonfarm payrolls grew by 171,000 in October, beating the Bloomberg forecast of 125,000. Private-sector payrolls came in slightly better, rising 184,000. Furthermore, we saw upward revisions of 84,000 to the prior two months.

However, we are not yet calling “all clear” – not by a long shot. The unemployment rate, which is derived from a separate survey, ticked up to 7.9% from 7.8%, as new entrants into the labor force exceeded those who landed jobs. Nonfarm payrolls, which have recently trended higher, have not exceeded 200,000 (modest growth at best by recovery standards) since February.

Economic growth must be far more robust than what we have been seeing in order to create the necessary jobs needed make a substantial dent in the unemployment rate.

The Election and the Fiscal Cliff

The presidential election is still too close to call according to Real Clear Politics…which ironically is not real clear about anything! I suspect it will be Wednesday morning before I know the outcome; there is NO WAY I’m staying up for this media slugfest.

How the races eventually play out – both the Presidential race and for control of the Senate – will have a big impact on economic and tax policies next year, including how the upcoming fiscal cliff may be resolved.

There are four possible paths:

1 – Kick the can down the road by delaying any tax and spending changes until 2013.

2 – Modest compromises are made in a lame-duck session of Congress.

3 – A so-called Grand Bargain is agreed to in a lame duck session that raises taxes and reforms entitlement spending.

4 – We fall over the fiscal cliff – this invokes memories of Saturday morning Road Runner cartoons.

Number 4 is the least likely scenario, in my view, given the economic consequences.

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⁽¹⁾      West Texas Intermediate crude spot price is as of end of week.

⁽²⁾      London Bullion Market Association; gold fixing pricing at 3 p.m. London time.