A Disappointing Jobs Report

The labor market recovery continues to plod along, adding a disappointing 162,000 jobs in July according to the payroll survey, but with the household recording a 0.2 percentage point drop in the unemployment rate to 7.4 percent.

A lot of professional forecasters who’d been looking at other aspects of the data anticipated a better number than this. And perhaps they’ll be vindicated when revisions are in. These numbers really do move quite a bit as more information becomes available. But, of course surprises, on the downside are possible as well as surprises on the upside.

The fact that this happens is a reminder of how insane it is that we’ve had months of speculation about when the Federal Reserve is going to start “tapering” its quantitative easing bond purchases. The inflation data has been crystal clear about the fact that we continue to be in a very low-inflation environment. But some things that looked like good news on the jobs front had people itching to head for the exit doors. The dual mandate isn’t supposed to work like that. The employment aspect of it is a reason to sometimes avoid tight money even when inflation is running over 2 percent. There’s never a reason to implement tighter money when inflation is below the target level.