Long live QE2.
That’s the takeaway from Friday’s weak jobs report, according to one skeptic on the supposedly gathering U.S. recovery.
The economy added just 103,000 jobs in December, the government said. That’s well below the Wall Street expectation and just a fraction of the 297,000-job gain estimated this week in one private sector survey. The unemployment rate tumbled, but mostly because so many workers dropped out of the labor force.
The report is “a bitter disappointment,” says Paul Dales of Capital Economics in Toronto. He says anemic job growth should quiet talk that the Federal Reserve may soon back away from its latest plan to buy Treasury bonds in a bid to boost demand for goods and services.
Overall, the US economy is still not creating enough jobs to generate a sustained and meaningful fall in the unemployment rate. Even at an 18-month low of 9.4%, the unemployment rate is still roughly double what it was before the recession began. As such, the Fed is unlikely to call an early halt to its asset purchases.