Fed caught flat-footed by lousy hiring figures

Federal Reserve building in Washington
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(MoneyWatch) Members of the Federal Reserve's Open Market Committee weren't expecting the lousy March jobs report, according to the minutes of its last meeting.

The minutes of the meeting, which were released early Wednesday rather than in the afternoon as usual, show Fed officials believed the economy was performing better than expected. As a result, many of the members of the FOMC wanted to wind down its bond-buying program.

"A few members felt that the risks and costs of purchases, along with the improved outlook since last fall, would likely make a reduction in the pace of purchases appropriate around midyear, with purchases ending later this year," according to minutes from the March 19-20 meeting.

"Several others thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end."

Labor conditions did not improve in March. Last Friday the Labor Department reported only 88,000 new jobs were created, the worst numbers in nine months.

When or if the Fed will wind down the program is now up in the air, as analysts at Capital Economics pointed out in a note to investors:

"Obviously, the weakness of employment growth in March, if it proves to be the start of a weaker trend rather than a blip, would disrupt that timetable. But assuming employment growth rebounds, as we think it will, that timetable still looks valid. ... All things considered, the anticipated slowing of [the bond buying program] might be a bit quicker than markets had fully appreciated, but everything still hinges on the performance of the economy."

Not everyone is so sanguine about the economy. Tom Digaloma of Navigate Advisors sent out a note to his clients telling them to ignore the FOMC minutes all together: "Talk of tapering purchases was blown out of the water with Friday's horrible jobs figure."

The minutes of the Fed's March 19-20 meeting were released five hours earlier than planned after the Fed inadvertently sent them a day earlier to congressional staffers and lobbyists. "The minutes of the March 19-20 meeting of the Federal Open Market Committee are being released early today. The reason is they were inadvertently sent early to a list of individuals who normally receive the minutes by e-mail shortly after their normal release time. The individuals on the distribution list -- primarily congressional employees and employees of trade organizations -- received the minutes shortly after 2 p.m. Tuesday," a spokesman said in a statement.

-- The Associated Press contributed to this story

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