Brighter outlook makes Fed tapering more likely
The economy is showing strength as summer nears a close — a trend that’s raising the likelihood that the Federal Reserve will slow its bond buying later this month.
The steady improvement is also lifting hopes for today’s report on job growth last month. The August gain is expected nearly to match the year’s monthly average of 192,000 jobs.
On Thursday, reports showed that services companies are stepping up hiring and that a dwindling number of people are losing jobs. Those figures follow reports of stronger auto sales and faster expansion by U.S. factories.
This year’s solid job growth, along with a sharp drop in layoffs, has helped lower the unemployment rate to 7.4 percent from 7.9 percent in January. It also means more Americans are earning paychecks and likely will boost consumer spending in coming months.
Analysts predict that employers added 177,000 jobs in August.
The improved jobs picture is a key reason most economists expect the Fed to announce later this month that it will scale back its bond buying. The Fed’s $85 billion a month in Treasury and mortgage-bond purchases have helped keep home-loan and other borrowing rates ultra-low to encourage consumers and businesses to borrow and spend more.