The pace of US jobs growth stalled for a second straight month, raising questions about whether the Federal Reserve can begin scaling back its enormous pandemic-era monetary stimulus as early as next month.
Employers in the world’s largest economy added just 194,000 jobs in September, falling short of the disappointing 366,000 gains posted in August. Economists had expected an increase of 500,000.
The unemployment rate declined for the third straight month, however, falling from 5.2 per cent to 4.8 per cent.
Federal Reserve chair Jay Powell had said that a “decent” report would mean the employment benchmark set forward by the Fed to begin winding down its $120bn asset purchase programme would be met.
The US central bank has committed to buying Treasuries and agency mortgage-backed securities at that pace until it sees “substantial further progress” on dual goals of inflation that averages 2 per cent and maximum employment. The first goal has already been achieved, with consumer price growth hovering around a 13-year high.
Powell said last month, following the sharp slowdown in job creation, that the second goal was “all but met”.
The latest job data will challenge the widely held view that a taper announcement will come at the next policy meeting in November. Powell said officials broadly support the stimulus programme ending in the second half of 2022, but said that the timing and pace of the taper would not give a “direct signal” about the timing of future interest rate increases.
Projections published by the Fed last month suggest a growing number of policymakers believe an adjustment to rates may be appropriate by the second half of the year. Officials are now evenly split on the prospects of that, with at least three interest rate increases pencilled in by the end of 2023.
The Fed has stipulated it will keep its main policy rate at current near-zero levels until it sees inflation that is on track to “moderately exceed” 2 per cent “for some time” and maximum employment.
Senior officials have urged a patient approach to tightening policy, given marginal improvement in the labour force participation rate, which tracks the number of Americans employed or looking for a job.
In September, it was little changed at 61.6 per cent.
Source: Economy - ft.com
