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Fed Watches Friday's Jobless Data For Signs To End Stimulus


This is MORNING EDITION from NPR News. I'm Renee Montagne.


And I'm Steve Inskeep. Good morning.

Let's try to figure out what today's unemployment report means. NPR's John Ydstie has been following the story. He's in our studios. John, good morning once again.

JOHN YDSTIE, BYLINE: Good morning, Steve.

INSKEEP: OK. What are the numbers first?

YDSTIE: Well, 169,000 new jobs were added to payrolls in August, according to the government report.


YDSTIE: And the unemployment rate fell from 7.4 percent to 7.3 percent, somewhat unexpected.

INSKEEP: Let's try to figure out if that is good or bad. When you were talking with us earlier, didn't you say that analysts were expecting something more than 169,000 new jobs?

YDSTIE: Yeah, around 180,000. But I think that, you know, it's in the ballpark, and there's a margin of error in these numbers. So I think it's pretty close to expectations. The fall in the unemployment rate is a bit surprising, though. And remember, the big thing here was that the Fed is going to be taking a close look at these numbers as they decide whether to pull back on their stimulus for the month, the $85 billion in bond buying they've been doing, trying to get the economy going.

INSKEEP: OK. Let's remember here. Their goal has been, for the last several years, to pump money into the economy, to keep things going, and they're trying to figure out the right moment to pull out the IV. So...

YDSTIE: Exactly.

INSKEEP: ...how are they deciding that?

YDSTIE: Well, they're looking at all the economic data and these jobs numbers particularly. And I think with this number as close as it is to expectations, it's likely the Fed is going to go ahead and begin pulling back in September, as they plan to do.

INSKEEP: So this is a little worse than expected, but not so much worse than expected that the trend changes...

YDSTIE: Right. Now, there are some troubling things in the internal numbers of the report. There was a 58,000 job revision downward for the July numbers. Now, that's disappointing. It's a big number. But part of it was due to auto companies switching over to new model year, shutting down their assembly lines. Now, those jobs are added back in August, but then that takes a little bit off the top-line number in August.

INSKEEP: Makes that look a little bit less impressive there.

YDSTIE: Exactly.

INSKEEP: OK. So we have these quirks in the numbers. It appears that the summer was not quite as good as a summer as it seemed. But at the same time, John, you said the unemployment rate is down to 7.3 percent, which is a tick down, one-tenth of a percentage point down from 7.4. Isn't that good news?

YDSTIE: Well, you'd think it was, but the problem is this: It was largely due to a drop in the labor force, which is not a good sign during a period when you want to see people coming back into the job market.

INSKEEP: You're say the number of people looking for work went down here.

YDSTIE: Right. And the rate, participation rate, the labor force participation rate -that's the percent of the working population that's looking for a job or holding a job - is at 63.2 percent. That's the lowest level in 35 years. Part of it's demographic, older folks and the baby boom leaving the workforce. But it is troubling because you want to see people coming back into the workforce at this point in the recovery.

INSKEEP: So the job market is still not anywhere near what people would want it to be. What's happening? What seems to be dragging the labor market still, even at this point, so many years after the financial crisis?

YDSTIE: Well, I think it's just that we're not having fast enough growth. Now, there was - and you might think that this would be enough to keep the Fed from beginning to pull the stimulus back.

INSKEEP: Oh, yeah.

YDSTIE: But here's the thing. We've seen a little bit of an uptick in growth - in the second quarter of the year, two-and-a-half percent annual growth rate. We had a couple of reports this week on both manufacturing and the service sector. Nice upticks in both of them. And autos are selling well, and the housing market's recovering.

So I think when the Fed takes this all together, it really wants to get out of this intervention in the economy, and it's looking for everything it can to do that, to pull back, because this is an uncomfortable place for the Fed to be. So I think they're going to go ahead with the pullback. It might be $10 billion instead of $20 billion off of the 85 billion. But I think they're still going to go ahead.

INSKEEP: Pull out the IV a little bit slower. John, thanks very much.

YDSTIE: You're welcome, Steve.

INSKEEP: That's NPR's John Ydstie. Transcript provided by NPR, Copyright NPR.

Steve Inskeep is a host of NPR's Morning Edition, as well as NPR's morning news podcast Up First.
John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.