Employment data Continues to be Weak

Although the September US employment data showed that the labor market recovery is slowing down, Wall Street believes that given the significant recovery of the US economy, the Federal Reserve (Fed) should still withdraw its $120 billion monthly asset purchase plan.

Investment giant BlackRock fixed-income CIO Rick Rieder said on Friday that the Fed may tighten its ultra-loose monetary policy in the near future. There is currently an “abnormal phenomenon” in the United States, and employment growth has risen from a single-month high in the past. In addition to the shortage of labor, the bottleneck of the supply chain has caused the prices of various commodities such as daily necessities and automobiles to soar, thereby inhibiting economic growth.

The US Department of Labor released September employment data on Friday. Among them, non-agricultural new employment was only 194,000, less than half of market expectations. The growth rate was the lowest this year, and the unemployment rate dropped significantly to 4.8%, which was better than expected.

However, BlackRock believes that given the significant recovery of the US economy, the Fed’s emergency monetary policy is unlikely to exist. In addition, Barclays (Barclays) economic research team Jonathan Millar also believes that the cumulative performance of the job market as of September is sufficient for the Fed to start reducing debt purchases in November.

Eric Winograd, senior fixed-income economist at Alliance Bernstein, said that Fed Chairman Bauer mentioned that there is no need to see a super strong employment report, as long as there is good employment data, the Fed can start to reduce debt purchases.

Although the slowdown in employment growth may delay the Fed’s reduction in debt purchases, Winograd still believes that there is a 70% chance that the Fed will officially start to reduce debt purchases in November, and the probability of waiting another month is 30%.

The Fed currently holds US$5.4 trillion in US Treasury bonds and approximately US$2.5 trillion in mortgage securities. The bank’s low interest rate policy and extreme liquidity are spreading to all markets. Since mid-August, the accumulated cash in the market with overnight buybacks has reached US$1 trillion to US$1.6 trillion

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