Fed's Williams Talks Cooling Labor Market, Cautious About September Rate Cut Expectations

Federal Reserve official and Powell ally Williams said, "The labor market conditions I have observed over the past year can be described as 'moderate and gradual cooling,' but overall it remains in a solid state." Although the unemployment rate in July only rose slightly to 4.2% (4.1% in June), the relatively weak non-farm payroll data provided space for Powell to promote a consensus on interest rate cuts. Williams pointed out that the significant downward revision of employment growth data in May and June is the real focus of this report. He said, "This information is crucial to help us understand the direction of labor supply and demand, as well as the cooling trend of labor market momentum." Regarding the possibility of a rate cut in September, Williams was cautious and did not endorse the market's once high expectation of 80% for a rate cut. He said, "The challenge faced by market participants is the same as what we face as policymakers. I think the market's reaction to signals is understandable." Williams expects the US economy to slow to about 1% this year, but he believes the economy is expected to recover in 2026. (Golden Ten)