September 2021 National Economic Outlook

Weaker August Jobs Report; FOMC Signals Asset Purchases to End This Year

Executive Summary

The U.S. economy added just 235,000 jobs in August, according to a survey of employers from the Bureau of Labor Statistics, far below the consensus expectation of 750,000. This was the weakest month for job growth since January 2021, and well below the recent pace. Despite the slowing in August, the three-month moving average of job growth was still very strong at 750,000. 

Employment in leisure/hospitality services was unchanged over the month; this followed six months of average monthly job gains of better than 300,000. The drop in job growth in the industry was likely due to a combination of lower demand because of rising coronavirus cases tied to the Delta variant and continued difficulties in finding workers.

The unemployment rate fell by 0.2 percentage point in August to 5.2%. This is the lowest the unemployment rate has been since the pandemic came to the United States, but is still above the 3.5% pre-pandemic rate. Employment in a survey of households (different from the survey of employers) increased by 509,000 in August.

The labor force increased by a disappointing 190,000 in August, with the labor force participation rate flat at 61.7%. The labor force participation rate was 63.3% in February 2020; there are almost 3 million fewer Americans either working or looking for work now compared to before the pandemic.

In its September 22 monetary policy statement the Federal Open Market Committee indicated that it is likely to announce a reduction in its purchases of long-term assets at its next meeting, in early November. The committee’s monetary policy statement said that “a moderation in the pace of asset purchases may soon be warranted.” This is based on the FOMC’s view that the economy has made progress toward the committee’s goals of maximum employment and price stability, and that that progress is likely to continue. 

Currently, the central bank is buying $80 billion per month of long-term Treasurys and $40 billion per month of mortgage-backed securities; these purchases put downward pressure on long-term interest rates, supporting economic growth. The actual reduction in asset purchases would likely start at the beginning of December, with the Fed wrapping up those purchases by late 2022.


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September National Economic Outlook

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