Ambrose Evans-Pritchard: Fed recoils from 1937 tightening error as jobs evaporate

By Ambrose Evans-Pritchard
The Telegraph, London
Wednesday, September 18, 2013

The American economy has shed 347,000 jobs over the past two months, roughly comparable with the rate of loss seen during the Great Recession. It is remarkable that the US Federal Reserve should even have been thinking of phasing out life-support in such circumstances.

The Fed's tough talk has already led to a 140 basis point rise in US 10-year Treasury yields, the benchmark price money for US mortgages and for the world (ex-China). It might as well have raised rates six times.

The shock decision on Wednesday night to put off tapering bond purchases is a recognition of what should have been obvious. Rising mortgage costs and the "tightening of financial conditions" could slow growth, it said. Indeed.

The net loss of jobs over the summer months has been entirely among men, mostly aged 25 to 54 and university educated. The cohort aged over 55 has been growing, so this is not happening because baby boomers are retiring early and happy to grow cantaloupes in Arkansas, or to play golf at Torrey Pines.

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