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Sep 08, 2012, 12.30 PM IST
The US' nonfarm payrolls increased only 96,000in August, well under the 125,000 expected. While the unemployment rate dropped to 8.1% from 8.3% in July, it was largely due to Americans giving up the search for work.
In an interview to CNBC-TV18, Kenneth Goldstein, Economist, Conference Board talks about his perspective on the market.
Here is an edited transcript.
Q: Let me break this jobs data up first into the addition to the non-farm jobs payroll. What do you make of this weakening pace of additions?
A: I don’t know that it is weakening. It has been weak all year long, it remains very weak. With the economy that’s going less then 2%, it is very difficult for this economy to even produce on a consistent basis more than 150,000 new jobs a month.
Q: The consensus expectation was for an addition of a 125,000 jobs. We have come in at 96000. Are you disappointed or were you expecting a number around this anyways?
A: No I am very disappointed at the drop in the average annual increase in wages. That is why we saw even a further drop in already a very low participation rate.
Q: We have seen the unemployment rate decline from 8.3% in July to 8.1% but that doesn’t tell the full story? It isn’t all positive news?
A: None of it is positive news. It dropped not because more people went to work but because more of those out of work couldn’t find a job and stopped looking.
Q: Where are we on the recovery curve in terms of where the US economy headed over the course of the next few months and may be even into 2013?
A: I think we are stuck because domestically given these conditions you have both consumers and businesses very cautious. That is keeping us from starting to move ahead. Also there are some very strong headwinds from abroad from both Europe as well as the Asia Pacific region even from Latin America. So, this is just simply a very tough environment across the globe, certainly for the United States and all of that suggests this is not going to change much over the next 6 months.
Q: Do you think this enhance is the prospects of further QE by the Fed even if that is not the perfect solution to this jobs problem? Do you think this enhances those prospects at the next meeting of the FOMC?
A: If you had asked me that question yesterday I though the chance of QE was about 25%. 24 hours later I would tell you it is probably closer to 75%.
Q: Is it 75% in the next meeting of the FOMC?
A: It almost makes it imperative that given what Bernanke has already said that at the next meeting they will take a move even though this may not do very much to change anything in the environment. But to make it look like given the fiscal gridlock that we are stuck in, at least somebody is willing to step up and do something.
Q: There was one section of economists and analysts who believe that the Fed may not want to do anything before the presidential elections because whatever they did would be politically tinged or would be perceived to be politically tinged. You don’t buy into that?
A: I think the box that they are in is if they do something that is going to be treated as if it is political. If they don’t do something right now that would be treated as something political.
Jun 18 2013, 10:41
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Jun 18 2013, 10:41
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