QE And Jobs

Well the usual first Friday of the month jobs report watch is over and no one is happy. The report from the BLS itself was not that bad – 169,000 new jobs and an unemployment rate down to 7.3% – but rather significant downward revisions to the July and August numbers didn’t sit well. Here’s the detail from Bill McBride.

Total nonfarm payroll employment increased by 169,000 in August, and the unemployment rate was little changed at 7.3 percent, the U.S. Bureau of Labor Statistics reported today. …

The change in total nonfarm payroll employment for June was revised from +188,000 to +172,000, and the change for July was revised from +162,000 to +104,000. With these revisions, employment gains in June and July combined were 74,000 less than previously reported.

The decline in the unemployment rate is attributed to the same old metric we’ve seen throughout the recovery, fewer people working. Again from Mr. McBride the graph that really says it all (click here for a larger image).

Employment Pop Ratio, participation and unemployment rates

Let me engage in understatement and opine that things are not actually going well on the jobs front. The downward revisions to the prior two months data have to be considered more than just troubling. As several economists at the WSJ Real Time Economics blog noted, revisions in an improving economy tend to be to the upside not the other way around which begs the question as to whether the economy is really growing as we think it is or is there some other factor or combination of factors which is retarding job creation.¬†At some point we’re going to have to admit to ourselves that the buttons we’ve been pushing and the levers we’ve been pulling aren’t getting the job done, possibly because the cure we’ve chosen isn’t remotely related to the disease from which the patient suffers.

Which, of course, leads us to QE. There’s a lot of sentiment about today which holds that these jobs numbers require the Fed to rethink “tapering” (my candidate so far for the most obnoxious and overused word this year). I have no particularly strong view on their program one way or the other. I think it probably assisted the recovery by keeping rates low in the specific business sectors QE intended to assist, but gets more credit than likely is warranted. By the same token I think it has proven to be somewhat benign in terms of the potential terrors that some saw arising from its use. On balance though it seems fairly obvious that the one thing the program has not done is slow the decline in labor force participation. There may be good reasons for continuing QE but assisting the labor market isn’t one of them.

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