US jobs shock creates doubt over Federal Reserve taper

 

Economics Editor

A weak jobs report sent US government bond yields tumbling on Friday and created fresh uncertainty over the pace of the Federal Reserve’s tapering of its monetary stimulus programme.

The American economy created just 74,000 jobs in December, according to the Bureau of Labor Statistics. That was well below analysts’ expectations of a 200,000 gain and represented the smallest monthly rise in three years.

The report is in contrast with other recent economic indicators, such as consumer spending and factory output, that suggest the US economy is gathering strength.

While the unemployment rate dropped sharply to 6.7 per cent, down from 7 per cent the month before, this was due to 375,000 people dropping out of the labour market. The labour participation rate in the US now stands at 62.8 per cent, its worst in more than three decades.

Hours were also down slightly, with the average work week declining to 34.4 hours in December.

The disappointing news pushed the 10-year US Treasury yield down eight basis points to 2.88 per cent, as traders recalibrated their bets on the timing of the taper.

The American central bank announced a $10bn (£6bn) reduction in its monthly programme of asset purchases to $75bn last month, and financial markets had expected those reductions to continue steadily through this year in line with the brightening outlook.

“Clearly this latest news raises some uncertainty” said Paul Edelstein of IHS Global Economics. “The Fed might choose to wait for another data point on the jobs market to see if December was an aberration.”

Other analysts, however, predicted that the taper would continue. “Remember that the economy is likely to have grown with a 3 per cent annualised handle in the fourth quarter and the fiscal clouds have lifted,” said Simon Smith at  the broker FX Pro. “As the Fed will say, tapering is not tightening, so the stance remains very accommodative.

The Fed will hold its next policy meeting at the end of the month. This will be the last meeting chaired by Ben Bernanke before Janet Yellen takes over. President Barack Obama announced yesterday that he will nominate Stanley Fischer, the former govenor of the Bank of Israel and vice chairman of Citigroup, to be Ms Yellen’s vice chair.

 In Britain, the National Institute of  Economic and Social Research estimated yesterday that the UK economy grew by 0.7 per cent in the final quarter of 2013, a slight slip from the  0.8 per cent expansion in the third quarter.

There were also two disappointing reports from the Office for National Statistics, which said manufacturing output failed to grow in November, while construction output dipped 4 per cent. This data is in stark contrast to survey readings for the two sectors, which pointed to strong growth.

Arts & Entertainment
Ricky Gervais at a screening of 'Muppets Most Wanted' in London last month
tvAs the second series of his divisive sitcom 'Derek' hits screens, the comedian on why he'll never bow to critics who habitually circle his work
News
news
Life & Style
Going down: Google's ambition to build an elevator into space isn't likely to be fulfilled any time soon
techTechnology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
News
David Cameron sings a hymn during the enthronement service of The Most Rev Justin Welby as Archbishop of Canterbury, at Canterbury Cathedral last year
news
VIDEO
Life & Style
From long to Jong: Guy Pewsey outside Mo Nabbach’s M&M Hair Academy in west London before the haircut
fashionThe Independent heads to an Ealing hairdressers to try out the North Korean dictator's trademark do
Sport
Vito Mannone fails to keep out Samir Nasri's late strike
sportMan City 2 Sunderland 2: Keeper flaps at Nasri's late leveller, but Black Cat striker's two goals in 10 minutes had already done damage
Extras
indybest10 best smartphones
News
peopleRyan Gosling says yes, science says no. Take the A-list facial hair challenge
Arts & Entertainment
tvCreator Vince Gilligan sheds light on alternate endings
News
Paul Weller, aka the Modfather, performing at last year’s Isle of Wight Festival in Newport
people
Arts & Entertainment
Play It Forward: the DC Record Fair in Washington, US
musicIndependent music shops can offer a tempting alternative to downloads on Record Store Day
Sport
video
News
Supermarkets are running out of Easter Eggs
Deals make eggs cheaper than normal chocolate
Life & Style
Wasp factory: 1.3 million examples of the Vespa scooter have been sold in the last decade
motoringIconic Italian scooter still revving up millions of sales
Voices
voicesThe Ukip leader on why he's done nothing illegal
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Analyst - Financial services, Client data, LEI

£40000 - £50000 per annum + BONUS + BENEFITS: Harrington Starr: A leading, Cit...

Management Consultancy - Operational Research Analysts

£35000 - £50000 per annum + Bonus + Benefits: Pro-Recruitment Group: You must ...

Corporate Actions Consultant - Market data, ISO15022, presales

£45000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: Corporate Acti...

Prudential Risk/Operational Risk Associate - London

£350 - £400 per day: Harrington Starr: An opportunity has arisen at a FCA regu...

Day In a Page

Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics

Is sexual harassment a fact of gay life?

Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics
Kim Jong-un's haircut: The Independent heads to Ealing to try out the dictator's do

Our journalist tries out Kim Jong-un's haircut

The North Korean embassy in London complained when M&M Hair Academy used Kim Jong-un's image in the window. Curious, Guy Pewsey heads to the hair salon and surrenders to the clippers
A History of the First World War in 100 moments: A forgotten naval victory in which even Nature played a part

A History of the First World War in 100 moments

A forgotten naval victory in which even Nature played a part
Vespa rides on with launch of Primavera: Iconic Italian scooter still revving up millions of sales

Vespa rides on with launch of the Primavera

The Vespa has been a style icon since the 1950s and the release this month of its latest model confirms it has lost little of its lustre
Record Store Day: Independent music shops can offer a tempting alternative to downloads

Record Store Day celebrates independent music shops

This Saturday sees a host of events around the country to champion the sellers of well-grooved wax
10 best smartphones

10 best smartphones

With a number of new smartphones on the market, we round up the best around, including some more established models
Homelessness: Why is the supported lodgings lifeline under threat?

Why is the supported lodgings lifeline under threat?

Zubairi Sentongo swapped poverty in Uganda for homelessness in Britain. But a YMCA scheme connected him with a couple offering warmth and shelter
A History of the First World War in 100 Moments: When the world’s biggest shed took over Regent’s Park

A History of the First World War in 100 Moments

When the world’s biggest shed took over Regent’s Park
The pain of IVF

The pain of IVF

As an Italian woman vows to keep the babies from someone else’s eggs, Julian Baggini ponders how the reality of childbirth is often messier than the natural ideal
Supersize art

Is big better? Britain's latest super-sized art

The Kelpies are the latest addition to a growing army of giant sculptures. But naysayers are asking what a pair of gigantic horse heads tells us about Falkirk?
James Dean: Back on the big screen

James Dean: Back on the big screen

As 'Rebel without a Cause' is re-released, Geoffrey Macnab reveals how its star perfected his moody act
Catch-22: How the cult classic was adapted for the stage

How a cult classic was adapted for the stage

More than half a century after it was published 'Catch-22' will make its British stage debut next week
10 best activity books for children

10 best activity books for children

Keep little ones busy this bank holiday with one of these creative, educational and fun books