Mixed News on the Employment Front

Obviously, I am pleased by the fact that we have 288,000 new jobs, and an unemployment rate that is down to 6.3%. But there remain worrisome elements in the latest employment report:

. . . the good news was tempered by a drop of 806,000 in the number of Americans in the labor force, pushing the labor participation rate down sharply. And despite the fall in joblessness, average hourly earnings were flat.

“The payroll numbers suggest that the economy is recovering from a weather-induced showdown, said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. But “even with the drop in the unemployment rate,” he said, “we still have not reached to point where workers have negotiating power.”

And there is also this little bit of bad news.

Thanks to jobs reports like this one, I continue to think that the Federal Reserve should refrain from tapering off bond purchases. The employment market simply does not have enough traction to pull itself out of its doldrums. The Federal Reserve is still needed in order to help the employment market along, and to alleviate some of the bad news that keeps finding its way into monthly jobs reports. There is no threat of inflation on the horizon, so it costs us nothing to continue bond purchases and other forms of Federal Reserve stimulus. I cannot understand why a consensus exists on the Federal Reserve that tapering off stimulus is a good idea, and I certainly cannot understand why that consensus is not disturbed or overturned by the latest jobs report.

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