The August jobs report added just a third of the jobs expected, changing the expectations for the Fed’s future moves.
Economists agree that the rising specter of the Delta variant over the economy is responsible for the slowdown in jobs numbers.
Though demand for labor is still strong, the changes in the economy’s trajectory make it "unlikely" the Fed will announce a taper at the September meeting, Bank of America analysts wrote in a note Friday. A taper is when the Fed slows down its asset buying, a key step in reversing measures to support the economy.
Tapering, Bank of America added, could come in the November meeting depending on how the data shake out.
“The jobs report does still leave the Fed to provide additional guidance regarding the taper timeline, contingent on the data improving and getting past the recent weakening due to Delta. We still think a November taper announcement is in play but provided that the data bounce and the weakness, mostly due to Delta, proves temporary,” the bank wrote.
ING’s James Knightley agreed with the November calculus, writing, “Given our reasons for optimism November looks a decent date for that announcement with a December start point.”
TDBank remained even more conservative on that timing, noting that it sees a higher “probability of a formal announcement coming at the December rather than the November meeting.”
In any event, it’s probably not happening at the September meeting.
“Any way you cut it, a majority of Fed officials will not be doing handstands and bragging about the economy’s progress,” wrote Chris Rupkey of FWDBonds in a note Friday. “So we doubt the September meeting will be the right time to declare victory and announce the start of tapering.”