"Fed's Megaphone": Slowing Job Market to Test Fed's Unyielding Rate Policy

In a message from the "Fed Whisperer," Nick Timiraos, it was stated that the recent three-month slowdown in employment may have opened the door for Fed officials to consider a rate cut at their next meeting in September. At the very least, this highlights the difficult balance they face amidst economic slowdown and rising inflationary pressures.

Given the labor market had been showing robust job growth, Fed officials had been comfortable this year holding rates steady. However, significant downward revisions to the May and June employment data changed that picture. Fed officials had previously indicated they were less focused on overall job growth, as it has slowed in tandem with a deceleration in labor force growth.

When the labor supply shrinks, even if job growth slows, the unemployment rate can still remain stable or decrease. However, Fed Chair Powell noted this week that the stability of the unemployment rate may mask underlying weakness—a balance that is inherently fragile when job seekers decline at the same time as job vacancies. He mentioned the "downside risks" in the labor market six times during the press conference, hinting that actual weakness could provide a basis for policy easing. [BlockBeats]