Everybody's Asking What The Fed Will Do Next After That Bad Jobs Report

Janet yellenREUTERS/Joshua RobertsU.S. Federal Reserve Vice Chair Janet Yellen stands after testifying during a confirmation hearing on her nomination to be the next chairman of the U.S. Federal Reserve before the Senate Banking Committee in Washington November 14, 2013.

SocGen economist Michala Marcussen is out with her latest look at the top questions from clients.

The #1 question? What next for the Fed.


Expectations of Fed tapering shifted to “slow” after Friday’s employment report showed a mere 74K new jobs created in December. At the same time, the unemployment rate hit its lowest level since October 2008 at 6.7%. As highlighted by US data guru, Brian Jones, part of the explanation for the weak payrolls resides with weather related factors.

It’s not just the grips of a polar vortex that could see new surprises delivered by the employment reports. In the latest edition of US Themes, Chief US economist, Aneta Markowska discusses Unemployment and forward guidance, with a particular focus on the role of demographics and the participation rate. Bottom-line, our central scenario remains that of a sustainable recovery for the US economy driving an acceleration of tapering (relative to the $US10bn per FOMC implied by President Bernanke) during the spring and with the first rate hike in summer 2015.

This is just SocGen’s view, but in the absence of further evidence of a downturn, we don’t think it’s done much to change the overall consensus view that the economy is accelerating and that the Fed will keep winding down QE.

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