Friday’s Jobs Report was widely anticipated.  Wall Street was holding its breath.  It has been tying itself into knots worrying that the Fed was about to “take the punch bowl away” or start tapering quantitative easing (QE).  A good Jobs Report will be the trigger to start this tapering or reducing the amount of QE each month.

To refresh your memory, QE is when the Fed purchases bonds issued by the Treasury Department.  Because this increases the demand for those bonds, they are easier for the Treasury to sell the bonds at lower interest rates.  This has been a primary tool for the Fed to keep interest rates low.  If the Fed tapers or reduces its monthly purchases of Treasury bonds, then the Treasury will have to issue those bonds at higher interest rates in order to sell them.  So, beginning any reduction in monthly purchases by the Fed equals the beginning of interest rates increasing.

All of this was in the back of Wall Street minds on Friday, when the Department of Labor announced 169 thousand jobs were created last month.  The market was expecting about 175 thousand, so that was close enough for economists, but not Wall Street.  If it had been 200 thousand, the Fed would be tapering soon.  At 150 thousand, the Fed would not begin anytime soon.  At 169 thousand, it was not too hot, not too cold — just perfect for Goldilocks maybe, but not Wall Street, which craves more certainty.

Coincidentally, Wells Fargo just released some interesting research on jobs.  It confirmed the widely held belief that most of the jobs being created were the low-paying jobs.  However, it also found that average real wages for the low-paying jobs was still dropping despite rising job creation.  Further, it found average real wages for high-paying jobs were rising fast despite weak job creation.  Certainly, increasing wage disparity is not good for what remains of the middle class, but nobody ever said capitalism was not cruel, only that it is efficient.

This rising income disparity tells me that the long-term unemployed have lost marketable job skills and will take whatever pay they can get, while businesses cannot find enough people to hire for high-paying jobs and are paying their current employees better to make sure they don’t leave.  That’s efficient, isn’t it?

Anyway, the Jobs Report is issued at 8:30 AM on the first Friday of each month.  Wall Street will be holding its breath again on October 4th . . . so will I!

In the meantime, the Fed meets again next week, and who knows what they’ll do?  That’s the problem!