• Thursday, February 22, 2024
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BusinessDay

Fed seen sticking to gradual tapering plan after payroll misses

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The Federal Reserve will stick to its plan for a gradual reduction in bond purchases, economists said after a government report showed that U.S. employment rose at the slowest pace in three years in December.

The Fed will reduce purchases in $10 billion increments over the next six meetings before announcing an end to the program no later than December, according to the median forecasts of 42 economists in a Bloomberg survey.

The 74,000 gain in payrolls was the weakest since January 2011, Labor Department figures showed. The coldest December in four years probably contributed to a slump in hiring at construction and recreation companies, while industries such as health care and accounting also cut staff.

“The weather probably did play a big role,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “It’s a reminder that the improvement is not going to be a straight line.”

The 10-year Treasury yield fell to 2.86 percent last week Thursday from 2.97 percent late the previous day. The Standard & Poor’s 500 Index rose 0.2 percent to 1,842.37 at the close in New York.

The unemployment rate declined to 6.7 percent, the lowest since October 2008, as more people left the labour force. The rate was forecast to hold at 7 percent.

The participation rate, which measures the proportion of people who are employed or looking for work decreased to 62.8 percent.