Inconclusive jobs numbers leave Fed on track, in my opinion, for September 18 taper

09/06/2013 3:59 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

It wasn’t so much the miss for August that hurt but the big downward revision for July.

According to the Labor Department, the U.S. economy added 169,000 jobs in August. That was slightly below the 177,000 jobs economists surveyed by Briefing.com were expecting. The unemployment rate ricked down to 7.3% for the month from 7.4%, but that was because of a drop in the labor participation rate. The number of people not in the workforce rose to 90.47 million in August from 89.95 in July.

The government also revised June's jobs number downward to 172,000 from 188,000 and the July number to 104,000 from an earlier 162,000. The downward revisions for the two months took 74,000 jobs out of the initially reported gains for June and July. On the news U.S. Treasuries rose slightly as the bond market apparently decided that the weaker than expected numbers lowered the chance that the Federal Reserve would begin to taper off its purchases of Treasuries and mortgage backed assets at its September 18 meeting. Yields on 10-year Treasuries dropped back to 2.93% after hitting 2.99% yesterday.

If you look below the headlines, though, the news doesn’t look bad enough to change the Fed’s thinking: If the Fed was going to start The Taper in September before this data release, I don’t see anything here to reverse that decision.

The reason to believe “no change” is that aggregate earnings increased 0.6% for the month as the average workweek increased to 34.5 hours in August from 34.4 hours in July and average hourly earnings increased by 0.2%. An increase in incomes is crucial to keeping consumption growing and should give the Fed confidence in the strength of the U.S. economy.

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