(MENAFN -Khaleej Times) Weak gains in US payrolls unlikely to affect Fed?s bond purchase programme
The US stocks rallied on Friday as the drop in the jobless rate suggested the economy can weather a reduction in stimulus. — AP
The weakest back-to-back gains in US payrolls in three years are unlikely to prompt the Federal Reserve to shelve its strategy of gradually trimming bond purchases, according to economists.
Hiring rose by 113,000 in January, less than the 180,000 gain that was the median forecast of economists surveyed by Bloomberg and following a 75,000 increase the prior month, Labor Department data showed in Washington on Friday. Unemployment fell to 6.6 per cent, the least since October 2008, from 6.7 per cent in December.
“This is a lackluster report, but it’s not enough to take the Fed out of autopilot on tapering,” said Thomas Costerg, an economist at Standard Chartered Bank in New York.
“They’ll take a broader look at the economy, not just at payrolls,” he said, as a “broad consensus” at the Fed favors cutting monthly bond buying by 10 billion at each policy meeting.
Janet Yellen is unlikely to signal any shift in the tapering strategy when she testifies to lawmakers this week in her first public comments as Fed chairman, according to Dean Maki, the New York-based chief US economist for Barclays. Yellen helped her predecessor Ben S. Bernanke develop the strategy, intended to avoid jarring markets and to give policy makers time to evaluate the state of the job market. “The message will be one of continuity,” said Maki, a former Fed economist. A range of employment data indicate the “overall picture is still one of moderate growth.”
US stocks rallied as the drop in the jobless rate suggested the economy can weather a reduction in stimulus. The Standard & Poor’s 500 Index rose 1.3 per cent to 1,797.02, while the yield on the benchmark 10-year Treasury note declined 0.02 percentage point to 2.68 per cent.
Fed officials will consider a range of labour-market data as they consider whether to keep cutting bond purchases at the same pace, Roberto Perli, a partner at Cornerstone Macro LP in Washington, said after the jobs report.
“You need to see a lot of weakness not just in the employment report but across all the other labour-market indicators that right now you don’t see,” said Perli, who formerly worked at the Fed’s monetary affairs division.