Faster U.S. job gains expected, may spur Fed to cut stimulus


By Lucia Mutikani (Reuters)

WASHINGTON (Reuters) – U.S. job creation probably picked up in August, signaling a steady pace of economic growth that would give the Federal Reserve ammunition to start scaling back its massive monetary stimulus this month.

Employers are expected to have added 180,000 jobs to payrolls last month after creating 162,000 in July, according to a Reuters survey of economists. The unemployment rate is seen steady at a 4-1/2-year low of 7.4 percent.

The closely watched jobs report from the U.S. Labor Department on Friday will provide a crucial piece of evidence for the Fed as it debates the future of its $85 billion per month bond-buying program, and it will set the tone for global financial markets.

Policymakers from the U.S. central bank meet on September 17-18 and are widely expected to turn down the dial on the purchases they have been making to keep interest rates low and boost growth.

Fed officials have made clear that they would base their decision on the progress the labor market has made since they launched their third round of ‘quantitative easing’ a year ago. When they pulled the trigger, they were looking at a jobless rate that stood at 8.1 percent.

“You will have to have very poor employment data to really have the Fed delaying tapering. We think that anything above 140,000 will be sufficient for the Fed to taper … We look not only for confirmation that they are going to taper but also the size of the tapering,” said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York.

If economists’ forecasts are correct, the employment report would suggest the economy remained on a steady growth path despite stumbling early in the third quarter.

Weak July data on consumer spending, home building, new home sales, durable goods orders and industrial production had fanned fears about growth. But those concerns eased this week with reports of solid automobile sales in August, strong services sector growth and a steady expansion at the nation’s factories.

“As long as we don’t see a clunker, we can take comfort that the economy, while not generating as many jobs as we would like, is going in the right direction,” said Robert Dye, chief economist at Comerica in Dallas.