Jobs growth 'won't alter' QE program

Economists are still forecasting the US Federal Reserve will delay tapering asset purchases until March even after a report showed employers added more jobs than forecast last month.

Economists are still forecasting the US Federal Reserve will delay tapering asset purchases until March even after a report showed employers added more jobs than forecast last month.

Policy makers will pare the monthly pace of bond buying to $US70 billion ($75 billion) at their March 18-19 meeting from $US85 billion, the median of 32 economist estimates in a Bloomberg News survey on Friday found.

The Federal Open Market Committee voted on October 30 to keep the pace unchanged, saying it needs more evidence of improvement in the economy. The jobs report probably is not enough to convince them that it is time to start tapering the quantitative easing program, said Stephen Stanley, chief economist at Pierpont Securities in Connecticut.

The strength of the payroll report "at least brings December back on the table, but in the end they're not going to have enough evidence to pull the trigger", he said. "Part of the reason they keep putting off any pullback in accommodation is that they're continually disappointed in the outlook."

Employers added 204,000 workers last month, the Labour Department reported. Revisions increased the job gains for the prior two months by a total of 60,000.

The jobless rate rose to 7.3 per cent from an almost five-year low of 7.2 per cent.

The report "makes us more comfortable with our March call", said Laura Rosner, a US economist at BNP Paribas in New York and a former researcher at the New York Fed. "This is the progress we need to be seeing in order to be confident by March of next year. We'll need to see a couple more reports to make sure the strengthening in the labour market sticks."

Fourteen of 32 economists surveyed said they expect the first reduction of bond purchases in March, while nine projected January and five forecast December. The remainder expect tapering to begin in April or June.

JPMorgan Chase economists moved their estimate for the first taper to January from March or April after the jobs data, which lifted the average payrolls gain for the last three months to 202,000.

"Now it seems like the hiring is holding up even though overall economic growth is still pretty lacklustre," said Robert Mellman, a senior US economist at JPMorgan.

"If they just get a few more reports confirming that what they see in the latest data is actually happening they'll be comfortable enough that they can start to taper."

Their forecasts for a March taper contrast with investor expectations for an earlier reduction in QE. Treasuries fell the most in four months on Friday, the US dollar strengthened and stocks rallied.

The yield on the 10-year note jumped 15 basis points to 2.75 per cent. The S&P 500 Index rose 1.3 per cent and the Dow Jones Industrial Average rallied 167.8 points to a record 15,761.78.

Payrolls increased at manufacturers by the most since February. Retailers added about twice as many workers as the month before, and leisure and hospitality employment was the strongest in six months. Factories added 19,000 workers. Industries to add factory jobs ranged from motor vehicles and fabricated metals to furniture and food processing.

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