Soft Jobs Data Not Expected to Deter Fed By CATHERINE RAMPELL Published: September 6, 2013 Despite a disappointing jobs report on Friday that raised fresh questions about the nation’s economic strength, analysts say they still believe the Federal Reserve will start pulling back on its stimulus program in a few weeks. The Labor Department’s snapshot of the job market in August had several discouraging details underneath a relatively mundane headline number, which showed the economy added an estimated 169,000 jobs. Perhaps the most striking was a plunge in the share of Americans who are either working or looking for work, which fell to its lowest level since 1978. “If you had a more optimistic view of the economy, which I think the Fed does, this should give you some pause,” said Joshua Shapiro, chief United States economist at MFR. “It’s been a real struggle here in the labor market.” At the same time, earlier estimates of job growth in July and June were revised sharply downward, and hiring over the summer months was largely driven by low-wage sectors like retail, food services and health care. Still, economists said they believed that Fed governors would find enough bright spots in this report to justify scaling back their monthly purchases of long-term Treasury bonds and mortgage-backed securities — measures that help push down long-term interest rates — after their next meeting on Sept. 17 and 18. “There’s just barely enough in that report and in other forward-looking indicators we’ve seen to give Fed governors the confidence they need on the 18th to taper,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics. “For the record, I don’t think they should, given the risks posed by Syria and the impending fiscal chaos in Washington,” he said, noting the expected Congressional battles over the debt limit and spending measures. “The costs of delaying until some of those factors are sorted out is not very great. But the Fed has given no indication it’s thinking that way.” Investors seemed to agree, with bond yields dipping slightly after the jobs report came out. As for stocks, after a topsy-turvy day, the Standard & Poor’s 500-stock index and the Dow Jones industrial average both closed about where they began on Friday. In Friday trading, the Dow closed down 14.98 points, or 0.1 percent, at 14,992. The S.& P. 500 edged up 0.09 points, or 0.01 percent, closing at 1,655.17. The Nasdaq climbed a slight 1.23 points, or 0.03 percent, to finish at 3,660.01. The price on a 10-year Treasury note rose 16/32, to 96 9/32, with the yield falling to 2.93 from 3.00 on Thursday. The number of payroll jobs added in August was just shy of the average pace of hiring over the last year, and the unemployment rate edged down to 7.3 percent from 7.4 percent. Unemployment, however, fell for the “wrong reasons,” Mr. Shapiro said: because people dropped out of the labor force and so were no longer counted as unemployed, and not because more unemployed people found jobs. The jobless rate is now edging close to the 7 percent level that the Federal Reserve chairman, Ben S. Bernanke, had identified as the Fed’s target for ending its asset purchases altogether around the middle of next year. For several months, Fed governors have been saying that the Fed expected to begin reducing the monthly purchases “later this year,” which has been widely interpreted to point toward beginning the shift as early as September. Charles L. Evans, president of the Federal Reserve Bank of Chicago and one of the more vocal proponents of highly accommodative monetary policy, used this phrasing in a speech on Friday, suggesting he was open-minded about the “exact pattern of the reduction in purchases that we eventually take.” The Fed’s more hawkish members have been more explicit about their desired policy moves. Esther L. George, president of the Federal Reserve Bank of Kansas City and a leading critic of the asset purchases, said on Friday that the Fed should cut its bond buying to $70 billion a month in September, from the current $85 billion a month, split between Treasuries and mortgage bonds. “It is time to begin a gradual — and predictable — normalization of policy,” she said. Some economists suggested that Fed governors could react to the latest economic data by tapering their bond purchases slowly over a longer period of time and perhaps in conjunction with other measures that would underscore the central bank’s commitment to helping the economy heal. For example, the Fed could announce that it is extending the period that it holds short-term interest rates near zero. “This is their chance to lay out a road map for policy to help institutionalize the support the Fed is providing, regardless of who is sitting around the table come January,” said Diane Swonk, chief economist at Mesirow Financial in Chicago, referring to Mr. Bernanke’s still-unknown successor to lead the Fed over the next four years. “The Fed operates based on institutional momentum. It only flips on a dime in a crisis.” Despite the generally dismal picture, there were some bright spots in Friday’s jobs report, including a tick upward in the average number of hours worked and a 5-cent gain in hourly wages for private sector workers. Over the last year, average hourly earnings have risen by 52 cents, or 2.2 percent, before adjusting for inflation. (Year-over-year inflation has averaged about 1.6 percent so far in 2013.) “It’s not just about how many jobs, but how much people earn in those jobs,” said Douglas P. Handler, chief United States economist for IHS Global Insight. Concerns remain about the quality of jobs being created. The industries driving hiring, like retail and food services, are more likely to hire part-time workers and operate on just-in-time schedules, making it difficult for employees to predict how many hours they will have from week to week. “It’s really frustrating not knowing whether I’ll have money to pay rent and my bills,” said Charles Eden, 20, who works at a Wendy’s in St. Louis for $7.60 an hour. Last week, he had 30 hours; this week, 12. Ideally, he wants 40. “It’s really hard to find a second job not knowing whether I can work or whether I can’t work in a given week.” As of August, there were 7.9 million Americans who wanted to work full time but could find only part-time work. When these workers and people who want a job but have stopped looking are included, the total underemployment rate rises to 13.7 percent. The labor force participation rate remains so low partly because the population is aging and partly because workers are sitting on the sidelines as they wait for the economy to heal. The big decline in the labor force in August was tied entirely to men dropping out; the number of women in the work force actually grew. “This suggests that much of the decline came from occupations that are male-dominated, such as construction, and that many former workers are becoming discouraged about their job prospects and dropping out of the labor force as a result,” said Mr. Handler. Three-quarters of the jobs added in August went to women, said Joan Entmacher, vice president for family economic security at the National Women’s Law Center. Most of the new jobs for women in August were in low-wage sectors, though, and men have captured most of the job gains since the recovery officially began in June 2009. Some workers who took shelter from the poor job market by enrolling in college and retraining programs these last few years — which young women have been much more likely to do than young men — are finally starting to cycle back into the work force, and the lucky ones are finding new and higher-paying opportunities. “I have people call me all the time now wanting to give me a job, and I have to say, O.K., thank you, but I think I have enough jobs now,” said Jordan Douglas of Pampa, Tex., a single mother working 60 to 70 hours a week in three jobs as a registered nurse. Ms. Douglas, 25, was laid off from a nursing home in February 2012 and struggled to find work. She decided to enroll in school full-time after finding a program that allowed her to continue receiving unemployment benefits while in training. Given her longer hours and higher hourly wage today, she now earns more than twice as much as she did before she was laid off. “I couldn’t have been where I am today had I not gone back to school, and I couldn’t have gone back to school if I hadn’t gotten laid off,” she said. “I didn’t know it at the time, but it worked out perfectly.” Binyamin Appelbaum contributed reporting. This article has been revised to reflect the following correction: Correction: September 6, 2013 An earlier version of this article referred incorrectly to members of the Federal Open Market Committee. Some members are presidents of regional Federal Reserve banks; they are not all members of the Board of Governors.
Posted on: Sat, 07 Sep 2013 04:46:29 +0000
Trending Topics
Recently Viewed Topics
© 2015