August Jobs Report

Definitely a bad one. Only 169,000 jobs were added in August. The unemployment rate dropped to 7.3% due to people leaving the labor force. And the past two months of lackluster job growth were revised down by a total of 74,000 jobs. The last three months have been the worst since the recent round of Quantitative Easing (QE) began.

Coincidentally, this comes as the Fed has been making noises about "tapering" or removing stimulus in the near future. Unexpectedly, after this began, around March, inflation expectations dropped (and were never high anyway). This is the same pattern as the previous rounds of QE: as their end became apparent inflation and hiring declined, leaving the economy stagnant and making future rounds of stimulus necessary. 

That being said employment data is always volatile, and other data such as car sales and new Unemployment Insurance claims still point to strong growth. But as long as inflation, and inflation expectations aren't high, and wages aren't rising, the Fed clearly has room to stimulate without much downside risk[1]. And the fastest way to stop using unconventional monetary policy, and thus reduce that risk, is to use it correctly the first time. Withdrawing stimulus in the near future would be a mistake, at least one person at the Fed understands this.







1. The risks people usually bring up include: overheating/inflation (which is ridiculous, see here and here), the creation of a new asset bubble (which I'm skeptical of given current economic weakness, and Monetary Policy is an incredibly blunt tool to use against a specific sector), or some other theoretical boogeyman associated with distorting markets (which is to argue that we should live negative effects that are happening - weak growth and high unemployment - to avoid theoretical negative effects that only might happen).