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

On August 1st, Nick Timiraos, the "Federal Reserve mouthpiece," stated 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 between a slowing economy and rising inflationary pressures.

Federal Reserve officials have felt comfortable holding interest rates steady this year, as the labor market has previously shown solid job growth. However, significant downward revisions to employment data in May and June have changed this situation. Fed officials previously stated that they had reduced their focus on overall job growth, as it was declining in tandem with a slowdown in labor force growth.

When the labor supply decreases, the unemployment rate may remain stable or decline even if job growth slows. However, 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 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 his press conference, suggesting that actual weakness may provide a basis for policy easing. [BlockBeats]