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"Fed Whisperer": A slowing job market will test the Fed's unyielding interest rate policy

OdailyAug 1, 2025
#Macro
"Federal Reserve mouthpiece" Nick Timiraos said that the slowdown in employment over the past three months may open the door for Fed officials to consider cutting interest rates at their next meeting in September. At the very least, it highlights the difficult balance they face as the economy slows and inflationary pressures rise. Because the labor market had previously shown solid job growth, Fed officials felt comfortable keeping interest rates unchanged this year. But the sharp downward revisions to the May and June jobs data have changed that. Fed officials have previously said they have reduced their focus on overall job growth, as it has declined in tandem with a slowdown in labor force growth. When the labor supply decreases, the unemployment rate may remain stable or fall even if job growth slows. But Fed Chairman Powell pointed out this week that the stability of the unemployment rate may mask underlying weakness -- a balance that is inherently fragile when fewer job seekers occur at the same time as a decline in job vacancies. He mentioned "downside risks" to the labor market six times in his press conference, suggesting that actual weakness could provide a basis for policy easing. (Golden Ten) [Odaily]
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"Fed Whisperer": A slowing job market will test the Fed's unyielding interest rate policy

OdailyAug 1, 2025
#Macro
"Federal Reserve mouthpiece" Nick Timiraos said that the slowdown in employment over the past three months may open the door for Fed officials to consider cutting interest rates at their next meeting in September. At the very least, it highlights the difficult balance they face as the economy slows and inflationary pressures rise. Because the labor market had previously shown solid job growth, Fed officials felt comfortable keeping interest rates unchanged this year. But the sharp downward revisions to the May and June jobs data have changed that. Fed officials have previously said they have reduced their focus on overall job growth, as it has declined in tandem with a slowdown in labor force growth. When the labor supply decreases, the unemployment rate may remain stable or fall even if job growth slows. But Fed Chairman Powell pointed out this week that the stability of the unemployment rate may mask underlying weakness -- a balance that is inherently fragile when fewer job seekers occur at the same time as a decline in job vacancies. He mentioned "downside risks" to the labor market six times in his press conference, suggesting that actual weakness could provide a basis for policy easing. (Golden Ten) [Odaily]
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