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August’s Unemployment Numbers Likely to Trigger Stimulus

A mere 96,000 jobs were added in August, and the unemployment rate fell only because of a drop in the labor force, the Bureau of Labor Statistics reported Friday.

A total of 368,000 people stopped looking for work in August, causing the unemployment rate to fall from 8.3 percent to 8.1 percent. In addition, July’s job numbers were revised down from 163,000 to 141,000.

Based on August’s numbers, economists are anticipating another round of quantitative easing. Here are responses from economists on the latest employment report.

Doug Duncan, Chief Economist, Fannie Mae

“The choppy labor market recovery will likely weigh on consumers going into the final quarter of this year as will the domestic fiscal policy headwinds. One sector of the economy that has shown increasing signs of a self-sustaining recovery is housing. The Fannie Mae August National Housing Survey, to be released on Monday, is expected to show that consumer expectations of the housing market continued to be favorable,

despite signs of increased concerns regarding the overall economy. Today’s report confirms our view that the housing recovery will be modest this year, and the subdued economic growth outlook is still subject to downside risk, which supports our prediction that additional Fed easing will soon be forthcoming.”

Paul Ashworth, Chief U.S. Economist, Capital Economics

“The modest 96,000 increase in non-farm payrolls in August only increases the probability that the Fed will launch QE3 next week and it won’t help President Obama’s re-election chances either….Stripping out the swings in the labour force, the employment-to-population ratio dropped to a 12-month low of 58.3%, from 58.4%, suggesting that no progress has been made in reducing labour market slack over the past year. The participation rate dropped to a 30-year low of 63.5%.”

Nigel Gault, Chief U.S. Economist, IHS Global Insight

“Uncertainties over the strength of global growth, the Eurozone crisis, the fiscal cliff and the November elections are giving plenty of reasons for caution. We expect subdued monthly job creation in the 100,000-150,000 region over the rest of the year…Since Fed Chairman Bernanke identified the labor market as a “grave concern” in his recent Jackson Hole remarks, today’s weak report should seal the deal for more easing from the Fed on September 13. We expect the Fed to extend its “low-rates” guidance through mid-2015, and to launch a QE3 program of asset purchases (concentrated on mortgage-backed securities) worth $500-600 billion. We don’t think these measures will be very effective in boosting growth, but for the Fed it’s a question of trying to do what it can.”