The Federal Reserve may have to postpone their plans to reduce stimulus efforts after the August jobs report revealed some bad signs, including slower growth than expected, despite an overall decrease in unemployment, the Los Angeles Times reports.
One of the most distressing parts of the job was a revision in the growth numbers reported in July; the new numbers show that only 104,000 jobs were added in July making it the worst month for the economy since June 2012, according to the Wall Street Journal.
"The dirt is in the details, and these are very dirty details," Diane Swonk, chief economist at Mesirow Financial, told the Los Angeles Times. "It's going to muddy the debate about what the Fed does."
The Fed is set to decide if they are going to start a rollback of the stimulus program on Sept. 17-18. Ian Shepherdson, the chief economist at Pantheon Macroeconomics, told the New York Times that he thinks it's likely that they will proceed with the rollback as planned.
"There's just barely enough in that report and in other forward-looking indicators we've seen to give Fed governors the confident they need on the 18th to taper," Shepherdson said. "For the record, I don't think they should, given the risks posed by Syria and the impending fiscal chaos in Washington. 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."
Unemployment fell from 7.4 percent in July to 7.3 percent in August. Normally any drop in unemployment should be seen as a positive sign but the reality of the recent drop is that it did not come from an increase in unemployed people finding jobs but rather from people dropping out of the labor force, according to the Wall Street Journal.
"It's very important to recognize that once again the decline in unemployment did not come the way you want it to - by more people getting jobs. It came by more people giving up the search and leaving the labor market," Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, told the Los Angeles Times.
"The labor market remains stuck in second gear and... the last thing you want to try to be doing in second gear is drive up a hill," Bernstein said. "The Fed should strongly reconsider tapering in September."
Jim Baird, chief investment officer at Plante Moran Financial Advisors told the Wall Street Journal that he also thinks it would be wise for the Fed to postpone their plan.
"Today's report paints a picture for the labor market that is not as rosy as most have expected," Baird said. "The jobs data give the Fed something to consider carefully before their impending decision on whether or not to begin tapering their bond purchase program."
