Year-end job gains key to Fed’s next move Big g

Year-end job gains key to Fed’s next move
Big gain could trigger another cut in bond buys; watch out for December freeze
WASHINGTON (MarketWatch) — The monthly U.S. jobs report is always a big deal, but the Federal Reserve has magnified its role by tying its interest-rate strategy to a sustained pickup in hiring.

The faster companies add workers and the unemployment rate falls, put simply, the faster the Fed will completely unwind a controversial bond-buying program meant to stimulate the economy.

If all goes according to plan, the U.S. is expected to show a net gain of around 190,000 jobs in December, a number that could spur top Fed officials to trim bond purchases for a second time when they meet in late January. The central bank took its first step last month to end the bond-buying program when it reduced purchases of Treasurys and mortgage-backed securities to $75 billion from $85 billion a month.

Yet a big gain in employment in December is no slam dunk. The report, released Friday, is expected to be fairly strong, but severe winter weather earlier in the month could have curbed hiring in industries such as construction and hospitality.

What’s more, the unemployment rate could actually rise from its current rate of 7% if more people enter the labor force because they think jobs are getting a bit easier to find. The Fed wants to see the jobless rate tumble toward 6% or less.

Even disappointing December jobs figures, however, would be unlikely to alter the Fed’s plan to end bond purchases by late 2014 — barring a wealth of other evidence suggesting that the economy is slowing again.

“I expect further reductions in the pace of purchases to be under consideration at upcoming meetings,” Richmond Federal Reserve President Jeffrey Lacker said Friday in a speech in Baltimore. http://www.marketwatch.com/story/year-end-job...2014-01-05