US Jobs Data Drops With Fewer People Looking For Work

The financial markets worldwide have cheered the poor US job data which came on Friday, September 6, 2013. The data indicated that the US economy added 169000 jobs in the market, taking the unemployment rate to 7.3%. Economists had expected to see 180000 new job additions, with a steady unemployment rate at 7.4%.

While the economy added fewer jobs, the drop in the unemployment rate is what concerns the markets. According to reports, this drop was due to the decline in people seeking out work, which has taken such people out of the official labour force.

In fact, the unemployment rate has come better than expected due to the decline in number of people looking for work. The labour force participation rate, i.e. the percentage of working-age people either working or looking for work, has also dropped to 63.2% in August 2013 from 63.4% in July 2013. This is also the lowest rate since 1978. This means that the actual unemployment rate adjusted for these changes may be quite higher than expectations.

To add to the woes, the Bureau of Labor Statistics (BLS) has revised the June and July 2013 payroll numbers significantly lower. The bureau said that the economy added just 148000 jobs per month in the past 3 months, down from a rate of 207000 jobs per month in the first three months of the year. This has slashed about 74000 jobs from the books.

With the rise in the number of people giving up job hunting and the less-than-expected addition in jobs, the US employment rate may not be as robust as it seems to be. The Federal Reserve may thus soften its stance on the USD 85 billion a month asset buying program. The US bond yields, which doubled to 3% by September 2013 from 1.5% in May 2013, have also shown some sign of softness, as they have come down from this peak to 2.93% today.

The Fed’s meeting due on September 17-18 is now key for the global economy. The markets have shown fantastic recovery on expectations that the regulator may extend the QE tapering deadline. It may also adopt a soft approach considering that the job market is still not very robust. This would take the markets to new highs. Any harsh comments by the Fed, however, may not be taken well.