Tags: Federal Reserve | taper | jobs | economy

WSJ: Taper Still on for January Despite Poor Jobs Report

By    |   Thursday, 16 January 2014 01:23 PM

The Federal Reserve will probably continue shrinking its bond-buying stimulus program this month despite December's poor jobs report.

The economy created only 74,000 new jobs in December, well below expectations. The unemployment rate dropped to 6.7 percent, but that was largely because of people dropping out of the work force.

Yet Fed officials believe the surprisingly dismal jobs number was an anomaly and the economy remains in recovery, The Wall Street Journal reports.

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Comments by top Fed officials indicate the central bank's policy-setting Federal Open Market Committee (FOMC) will continue tapering when it meets Jan. 28 and 29, The Journal reports. For instance, Chicago Fed President Charles Evans said reducing the monthly purchases in $10 billion increments at every meeting "seems quite reasonable" and that "it makes sense to continue that in January."

The Fed announced the starting of tapering its purchases in December when it reduced its monthly purchases from $85 billion to $75 billion a month.

In separate comments, Atlanta Fed President Dennis Lockhart, Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser have also said the Fed will continue tapering despite the poor jobs report.

"I've been pretty struck by the upbeat tone [in economic data] the past two months," San Francisco Fed President John Williams tells The Journal.

At his December news conference, Fed Chairman Ben Bernanke said the FOMC would continue reducing the purchases "in measured steps" as long as data "broadly supports" its economic outlook.

"Of course, continued progress is by no means certain. Consequently, future adjustments to the pace of asset purchases will be deliberate and dependent on incoming information," Bernanke noted

In a speech to the Greater Raleigh Chamber of Commerce, Richmond Fed President Jeffrey Lacker called recent economic trend encouraging.

"I would expect a similar reduction in pace to be discussed at the upcoming meeting," Lacker told reporters after the speech, according to Reuters.

"It takes a lot more than one labor market report to be convincing that the trend has shifted and in my experience one employment report rarely has an effect by itself on monetary policy."

The poor December jobs report could have been largely due to record cold weather that covered much of the country, according to Barron's.

Employment in construction, which is typically sensitive to weather conditions, fell for the first time in seven months. In addition, 273,000 people were not working in December because of the weather, compared with 84,000 in December 2012 and 127,000 in December 2011.

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Economy
The Federal Reserve will probably continue shrinking its bond-buying stimulus program this month despite December's poor jobs report.
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2014-23-16
Thursday, 16 January 2014 01:23 PM
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