Will slow job growth impact Fed’s tapering?

U.S. jobs rose by 194,000 in September, below economists’ average estimates for a gain of 500,000 jobs, the Labor Department reported Friday. But the data was mixed, with August’s jobs number revised upward by 131,000.

The combination may give the U.S. Federal Reserve more flexibility after Chair Jerome Powell signaled recently that the central bank looked to be on track to start tapering its $120 billion a month in bond purchases; a form of monetary stimulus, later this year.

According to some observers, this looks like enough labor report to allow the Fed to proceed with the taper in November, as flagged at the last FOMC meeting.

The concern among investors is that they would no longer be able to count on the Fed bringing more liquidity to the markets through quantitative easing, the policy of buying longer term securities from the open market, which in the past has given investors the green light to keep putting money into riskier assets.

Powell made it clear. Jobs gain of 200,000 or more “will push the Fed to further substantial progress”, a phrase that Powell has used to describe the precondition for tapering.

The unemployment rate fell to 4.8% from 5.2% in August, according to the report. The labor force participation rate, the percentage of the American population that is either working or actively looking for work, was down slightly to 61.6% from 61.7% in August.

The employment to population ratio, which measures the number of people employed against the total working-age population, ticked up to 58.7% from 58.5% in August.