Economists say the United States Federal Reserve will still delay tapering asset purchases until March next year even after a report on Friday showed employers added more jobs than forecast last month.
Economists expect policymakers will pare the monthly pace of bond buying to US$70 billion at their March 18-19 meeting, from the current pace of US$85 billion. The Federal Open Market Committee voted on October 30 to keep the pace unchanged, saying it needs more evidence of improvement in the economy.
Stephen Stanley, the chief economist of Pierpont Securities, said the jobs report was probably not enough to convince policymakers that it was time to start tapering the quantitative easing programme.
Stanley, a former Richmond Fed researcher, said the strength of the payroll report "at least brings December back on the table, but in the end they're not going to have enough evidence to pull the trigger".
He said: "Part of the reason they keep putting off any pullback in accommodation is that they're continually disappointed in the outlook."
US employers added 204,000 workers last month, according to the Labour Department report, compared with a median estimate of a 120,000 gain in a survey of economists. The jobless rate rose to 7.3 per cent from almost a five-year low of 7.2 per cent.
The report "makes us more comfortable with our March call", said Laura Rosner, an economist at BNP Paribas and a former researcher at the New York Fed. "This is the progress we need to be seeing in order to be confident by March next year. We'll need to see a couple of more reports to make sure the strengthening in the labour market sticks."
Economists at JPMorgan Chase moved up their estimate for the first taper to January from March or April after the jobs report, which lifted the average payrolls gain for the past three months to 202,000.
"Now it seems like the hiring is holding up even though overall economic growth is still pretty lacklustre," said Robert Mellman, a senior economist at JPMorgan. "If they just get a few more reports confirming that what they see in the latest data is actually happening, they'll be comfortable enough that they can start to taper."
The economists' forecasts for a March taper contrast with investor expectations for an earlier reduction in quantitative easing. Treasuries fell the most in four months on Friday, the US dollar strengthened and stocks rallied.
The yield on the 10-year note jumped 15 basis points to 2.75 per cent. The Standard & Poor's 500 Index rose 1.3 per cent and the Dow Jones Industrial Average rallied 1.08 per cent to a record 15,761.78 points. The dollar climbed against most of its major rivals.
Payrolls increased at manufacturers by the most since February. Retailers added about twice as many workers as the month before, and leisure and hospitality employment was the strongest in six months.
Factories added 19,000 workers in sectors ranging from cars and fabricated metals to furniture and food processing.