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Why tapering talk may be a ‘temporary sideshow’

Ben S. Bernanke, chairman of the U.S. Federal Reserve
Pete Marovich | Bloomberg | Getty Images
Ben S. Bernanke, chairman of the U.S. Federal Reserve

A toxic combination of depressed employment participation rates, weak real growth and the onset of Obamacare, will force the Federal Reserve to increase rather than decrease quantitative easing next year, according to the chief economist at SaxoBank.

Saxo Bank's Steen Jakobsen said the decline in the U.S. unemployment rate was deceptive and does not point to a recovery in the labor market.

"If you look at the reason why unemployment has come down, the participation rate has been a significant part of that. Basically, we haven't created necessarily more jobs, but less people have applied for jobs," Jakobsen told CNBC.

(Read more: Unemployment rates rise in most US states in July)

Nationwide, U.S.hiring has been steady this year, although it slowed in July, when employers added 162,000 jobs, the fewest since March. While the average unemployment rate fell to 7.4 percent, a 4 1/2-year low, unemployment still rose in more than half of U.S. states in July.

Jakobsen said the unemployment rate will get worse, rather than better, as optimism that the economy is on the mend will raise the participation rate, and thus more people will become registered as unemployed.

Jakobsen cited data from the U.S. Conference Board, that showed online advertised vacancies dropped by 92,200 in July, an indication that labor demand was stalling.

(Read more: Is taper talk behind the emerging markets rout?)

He added that the introduction of Obamacare (the Obama government's reform of the U.S. healthcare system) will also impact the employment rate:

"Pundits tend to forget that in an economy, it's not the amount of people working which makes up GDP, but the amount of hours worked. Obamacare, with its 30-hours rule, is forcing the retail and service industry to reduce their employment contracts below 29 hours per worker, to reduce the costs of Obamacare."

On a final note, Jacobsen said the U.S.'s disappointing growth in the first half of 2013 will take a while to impact the employment, arguing that "the rule of thumb is 18 months down the line". Thus, 2014 could see a weakening employment picture.

"Tapering is a temporary sideshow which will be replaced by disinflation and zero growth in 2014," he concluded.

(Read more: Fed's Lockhart. Bullard differ over Sept taper)

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