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The August Employment Report and the Fed

September 14, 2012

The August job market report was disappointing. Nonfarm payrolls rose less than expected and previous figures were revised lower. 

-Scott Brown, chief economist, Raymond James

The August job market report was disappointing. Nonfarm payrolls rose less than expected and previous figures were revised lower. The unemployment rate fell, but that was due to a decrease in labor force participation (don't read too much into that). Federal Reserve officials were close to taking action at the previous policy meeting and many judged that additional accommodation "would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery." In his Jackson Hole speech, Chairman Bernanke said he that "the stagnation of the labor market in particular is a grave concern." The jobs report should push the Fed off the fence.

The jobs report wasn't horrible. Job growth is still positive. However, the pace has remained relatively lackluster. Private-sector payrolls continue to improve, up 4.627 million since bottoming in February 2010. That sounds impressive, but that comes out to an average of 154,000 per month, somewhat more than would be consistent with the growth in the working-age population (about 140,000 per month).

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