"Fed Whisperer": Job Market Slowdown to Test Fed's Unyielding Interest Rate Policy

On August 1st, according to Jinshi Data, "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 holding interest rates steady this year. But the sharp downward revisions to the May and June jobs data changed that. Fed officials previously said they had reduced their focus on overall job growth, as it was declining in tandem with a slowdown in labor force size 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—this balance is inherently fragile when a decrease in job seekers occurs simultaneously with a decrease in job openings. He mentioned the "downside risks" of the labor market six times in the press conference, suggesting that actual weakness may provide a basis for policy easing. [Techflow]