BlackRock Investment Institute

Macro insights

U.S. jobs recovery paves way for taper

The Federal Reserve has made the start of asset purchase tapering conditional on having achieved “substantial further progress” on its inflation and employment goals. With Chair Jerome Powell acknowledging that this condition has been met for inflation, the last hurdle is employment. August payroll data released last Friday showed a 235K gain. Although far below expectations, seasonality could be at play and a revision upwards is possible. 

Employment rebound

Chart showing U.S. employment making up pandemic losses

Sources: BlackRock Investment Institute, Bureau of Labor Statistics, with data from Refinitiv Datastream, September 2021. Notes: The orange line shows total U.S. nonfarm payrolls. The yellow dashed line shows the level of employment that would make up two thirds of job losses as of December 2020.

The increase is a step toward making up two-thirds of job losses outstanding in December 2020 –the level some FOMC participants have indicated could be sufficient to represent substantial further progress in employment. See the chart. Strong readings in September and October could put the Fed in a position to make an announcement on tapering in November – not impossible given the end of the unemployment benefits top-up next month, in our view.

The Fed has emphasized that tapering is not a direct signal about a lift-off in policy rates, which we still don’t expect before 2023.

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Elga Bartsch
Head of Macro Research
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Nicholas Fawcett
Macro Research

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