To taper, or not to taper? Reactions are mixedSeptember 6, 2013: 10:49 AM ET
A weak August jobs report fueled intense debate about whether or not it's the appropriate time for the Federal Reserve to start winding down its bond-buying program.
On one hand, the unemployment rate has fallen from 7.8% to 7.3% since the Fed launched the stimulus program last September.
But on the other, the quality of job creation has been questionable, and the latest report shows Americans are still dropping out of the labor force.
Revisions showed the economy added 74,000 fewer jobs than last reported in June and July, and this alone may mean the Fed has to hold off on tapering, said Justin Wolfers, a University of Michigan economist and Brookings Institution senior fellow:
Never thought you would hear this said, but *revisions* mean: TAPER OFF.—
Justin Wolfers (@justinwolfers) September 06, 2013
Meanwhile, many Wall Street economists, like Deutsche Bank's Chief U.S. Economist Joseph LaVorgna, continued to caution clients that the Fed may still make the decision to taper at its upcoming September 17-18 meeting.
Call it the "mini-taper." Some market participants still believe the Fed will wind down its bond purchases, but only by a small amount, merely to send a signal to markets about more cuts to come.
Take for example, this tweet by Bill Gross, founder of Pimco -- the world's largest bond fund.
Gross: More "tinker than taper" in Sept. Most important: frontend yields anchored by FF rate are 2 hi based on today's report. Stay @ front.—
(@PIMCO) September 06, 2013
Diane Swonk, chief economist at Mesirow Financial, predicts the Fed may begin tapering in October. Previously, market participants had largely ruled out this timing, because press conferences are only scheduled after the Fed's September and December meetings.