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Economists rethink US economy on lower job data
January 11, 2014, 3:08 am

The US Labour Department said that fewer jobs were created in December than during the same period in the past three years.

The job market added 74,000 jobs in December, a drastic drop from the over 200,000 level in previous months, and far below expectations.

But analysts said this could have been due to the extreme cold weather in the past few weeks.

The unemployment rate fell from 7 to 6.7 per cent, most likely due to fewer people looking for work, and not because more people were finding work.

Data from the Labour Department actually showed a drop in the number of people working or looking for work to under 63 per cent, the lowest mark in three years.

A clear indicator that there is reason to worry that the economy may have caught some of the arctic freeze is the slow rise in the 10-year Treasury yield to nearly four per cent earlier in the week before subsiding to 2.88 per cent on Friday.

Interests rates are directly proportional to Treasury yields; if the yield goes up, so do interest rates.

Whether the Federal Reserve will now reconsider its tapering measure taken last month is yet unclear.

On December 18, citing better than expected economic indicators and the fall of the unemployment rate to 7 per cent, the US Federal Reserve decided to scale back its quantitative easing program by $10 billion.

“In light of the cumulative progress toward maximum employment and the improvement in the outlook for labour market conditions, the Committee decided to modestly reduce the pace of its asset purchases,” the Fed’s policy-making Open Market Committee (FOMC) said in a statement.

Its monthly bond-buying programme will now be reduced from $85 billion to $75 billion. FOMC also announced it could keep interest rates near zero despite falling unemployment figures.

Source: Agencies