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The weak non-farm payrolls number this morning means…the Federal Reserve is going to launch a third round of quantitative easing?
That’s what Bank of America-Merrill Lynch economists Neil Dutta and Ethan Harris are saying after picking their slack jaws off the ground after this morning’s crummy jobs report.
Yes, we know, many a rant was made this summer railing against the possibility of a QE3 and a QE4 and a QE5 after the Fed’s machinations this summer. But this call may be the most concrete and definitive we’ve seen from one of the big guys. Here’s the world in their eyes:
… “stuck in first gear” … “the proverbial screeching of the record” … “anemic” .. “nothing prepared us for the weakness in today’s report” … “household employment cratered” … “wage growth is essentially non-existent” … “Who will ask for a raise with 5 or 6 people competing for each available job?” … “It is clear that some of the damage to the job market is structural” …
The BAML team’s conclusion: once the Fed polishes off its QE2 asset purchases next summer, it’s gonna roll right on to QE3. (Which would have the Fed, among other things, beating the British monarchy to that august acronym.)
There you have it: weak wage growth, higher unemployment, and fewer industries adding jobs. This means that the Fed will complete its asset purchase program. And, given the overly-optimistic Fed forecast, our sense is that the Fed will go once again when the initial round of purchases is done in the early summer.
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MarketBeat looks under the hood of Wall Street each day, finding market-moving news, analyzing trends and highlighting noteworthy commentary from the best blogs and research. The Wall Street Journal’s Matt Phillips is the lead writer, with contributions from other Journal reporters and editors. Have a comment? Write to marketbeat@wsj.com or write Matt directly at matt.phillips@wsj.com.
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