"Fed Mouthpiece": Slowing Job Market to Test the Fed’s Unyielding Rate Policy

According to ChainCatcher, citing Jintou News, “Fed mouthpiece” Nick Timiraos stated that the employment slowdown over the past three months may have opened the door for Federal Reserve officials to consider a rate cut at their next meeting in September. At the very least, this highlights the difficult balance they face as the economy slows and inflationary pressures rise. Because the labor market had previously shown robust job growth, Fed officials have felt comfortable keeping rates unchanged this year.

However, the significant downward revisions to employment data for May and June have changed this situation. Fed officials previously indicated that they had reduced their focus on overall job growth, as it has been declining in tandem with a slowdown in labor force expansion. When labor supply decreases, even if job growth slows, the unemployment rate may still remain stable or even fall. But Fed Chair Powell pointed out this week that a stable unemployment rate may mask underlying weakness—when both the number of job seekers and job openings decline, this balance is inherently fragile. He mentioned “downside risks” to the labor market six times during his press conference, suggesting that actual weakness could provide grounds for policy easing.