US employment disappoints but Fed may still proceed with taper

Economic data on Friday were mostly weaker than expected.

In the US, employment increased by 169,000 in August, less than the median forecast of 180,000 from a Bloomberg survey. In addition, revisions subtracted a total of 74,000 jobs to the employment count for the previous two months.

The unemployment rate fell to 7.3 percent, the lowest since December 2008. However, this was due to workers leaving the labour force.

Despite the disappointing employment report, expectations for the Federal Reserve to start tapering its bond purchases soon were little changed. From Reuters:

Expectations for a modest cut in the U.S. central bank's monthly bond purchases at the upcoming meeting were mostly intact after a mixed August payroll report, released earlier on Friday.

Most economists at U.S. primary dealers expect the Fed to ease back on stimulus after the September 17-18 discussions, according to a Reuters poll which showed such bets had firmed in the last month.

Esther George, the Kansas City Fed's consistently hawkish leader, said she favored trimming bond purchases from their current $85 billion a month when policymakers next meet.

But Chicago Fed President Charles Evans, like George a voter on the policymaking committee this year, stressed a move to taper was not a done deal. He would weigh other evidence about the durability of the economic recovery, although he said he could be swayed toward a pullback.

Elsewhere in the world, German industrial production fell 1.7 percent in July, thus mostly reversing the 2.0 percent jump in June. Another report in Germany showed that exports fell 1.1 percent in July.

In the UK, manufacturing production rose 0.2 percent in July after having jumped 2.0 in June. However, overall industrial production was unchanged in July.

The UK goods trade deficit widened to 9.85 billion pounds in July as exports fell 7.6 percent while imports declined 1.0 percent.

On a more positive note, Japan reported that its index of coincident economic indicators rose 0.9 point in July while its index of leading economic indicators rose 0.6 point.