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Opinion
Matthew C Klein

Porn Shutdown Shock Won’t Stop Fed From Tapering

The latest employment numbers won't alter the Federal Reserve's timetable for scaling back its quantitative easing program.

The Bureau of Labor Statistics reports that the U.S. economy added 169,000 jobs in August. That's less than the 180,000 expected by economists surveyed by Bloomberg, and also less than the average increase of 184,000 jobs over the past 12 months. Revisions to the data from June and July also mean that there are 74,000 fewer people working than reported earlier. The unemployment rate fell because workers, including those between the ages of 25 and 54, continued to drop out of the labor force.

All of this is disappointing but not so disappointing that it forces the Federal Reserve to deviate from its probable reduction of asset purchases, or quantitative easing, later this month. As Chairman Ben Bernanke and other Fed officials have stated, the default expectation is that asset purchases will have stopped by the time the unemployment rate falls to7 percent. This is because Fed policy makers no longer believe that asset purchases have a positive impact and also believe that QE comes with costs. Much of the bad news in August can be attributed to a shutdown in the porn-film industry that doesn't reflect the underlying health of the economy. More importantly, job growth isn't weak relative to what the Fed has tolerated for years.