PIMCO’s Gross sees 50/50 chance of Fed taper in December

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Friday’s jobs report was pretty good. US economy added 208,000 jobs in November, and the unemployment rate dropped to 7.0%. PIMCO’s Bill Gross was making his monthly media rounds talking about interest rate reactions to the jobs numbers.

“It’s at least 50-50 now,” Pacific Investment Management Co.’s Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Mike McKee. “There was some logic for a January starting point, but it’s clear the Fed wants out. The Fed still has to be careful even when they begin to taper,” given the recent pace of growth has produced growth at only about 2 percent so far, he said.

The Fed has been very vocal starting as far back as this summer about their desire to reduce their purchases of bonds each month. It appears many large traders and investors are positioning for the coming reduction in Fed bond purchases with many betting the initial reduction will be smaller in size, with large reductions after the following Fed meetings. I’ll be watching Janet Yellen, the new Fed Chairperson, after the December Fed meeting to see how aggressive she wants the Fed to be.

As you can see in the above charts (data from the Bureau of Labor Statistics,) the trend is in the right direction. It’s worth noting that there is still a larger spread between those that are unemployed and the unemployed + those that are ‘under-employed.’ Many investors have expressed concern about how much of the stock market’s rise has been due to the Fed’s stimulus, but for me, it looks like economy still isn’t creating enough jobs, so how healthy is it?

I’ll post a follow up after the next Fed Meeting.