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At 8:30 A.M. (EDT), the investment community received the much-anticipated monthly report on the U.S. labor market, and at first blush it appeared to be an unimposing one at best. Specifically, the Labor Department reported that total nonfarm payroll employment increased by 169,000 in August, and the unemployment rate was little changed at 7.3%, versus 7.4% last quarter.

There were a few disconcerting aspects to the latest data. The report showed that the total number of jobs created during the months of June and July was revised lower by roughly 74,000 positions. We also learned that the slight downward tick in the nation’s unemployment rate was primarily driven by a reduction in the number of unemployed individuals actively looking for a new job. The civilian labor force participation rate edged down to 63.2% in August. That was the lowest level since 1978. Last, the 169,000 increase in August nonfarm payrolls was below the average monthly gain of 184,000 over the prior 12 months. The below-trend figure is a bit alarming in our view, as it has historically taken several consecutive months of job creation in excess of 200,000 positions to make a significant dent in the nation’s unemployment rate, which remains stubbornly higher even with the Federal Reserve’s aggressive tactics in recent years.

Breaking down the employment data into component parts, we see that growth in the retail trade and healthcare sectors was the primary catalyst behind the 169,000 increase in nonfarm payrolls. Employment also continued to trend up in the food services and drinking segments, in the professional and businesses services area, and in the wholesale trade sector. Conversely, employment in the information sector declined, which is not surprising given the recent layoffs in the information technology space.

All in all, the latest monthly reading on employment and unemployment was far from impressive and raises the question about when the Federal Reserve will begin to cut back on its asset purchases. Our sense is that the big issue for the investment community will be the overall breadth of the bond-buying tapering. Given the Federal Reserve’s dual mandate to promote employment and stable prices (the latter area has not been an issue for several years), we sense that the likely forthcoming reduction in the central bank’s bond-buying activity will probably be small, at the very least until some more progress is seen on the employment front. The latest monthly data, which included the aforementioned downward revisions to the June and July jobs creation figures, was not what the Federal Reserve was hoping for this morning.

At the time of this articles writing, the author did not have positions in any of the companies mentioned.