The very disappointing 54,000 increase in May's non-farm payrolls, down sharply from a 232,000 gain in April, will undoubtedly lead to calls for the Fed to continue with its large-scale asset purchases beyond the scheduled conclusion of QE2 at the end of this month. We probably will see growth rebound in the second half of the year, as commodity prices drop back and any Japan-related disruptions unwind. For that reason we don't expect the Fed to act immediately. Nevertheless, the extent of this slowdown is becoming a huge concern, particularly with a potentially big fiscal consolidation on the way and we wouldn't rule out a QE3 either later this year or in early 2012.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services