The August employment report was disappointing overall, leaving us comfortable with our view that the Fed is more likely to wait to taper – but it remains a game-day decision. Specifically, non-farm payrolls marginally disappointed consensus, growing 169,000 last month versus 180,000 expected. However, the net revisions of -74,000 for the prior two months were a larger disappointment, and leaves the 6-month moving average for payroll growth at just 160,000. Although the unemployment rate did fall to 7.3% from 7.4%, it was all for the wrong reasons: household employment fell, but the labor force fell more, bringing the participation rate down to 63.2% – its lowest level since 1978. There was some positive news on the income side, with hourly earnings and the workweek both rising.
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