I’m Matthew Boesler, an editor covering the US economy in New York. Today we’re looking at the latest jobs numbers and Fed policy. Send us feedback and tips to [email protected] or get in touch on X via @economics. And if you aren’t yet signed up to receive this newsletter, you can do so here.
Unambiguous Slowdown
Signals from the US labor market became decidedly less mixed as of Friday: The government’s latest monthly jobs report showed an unambiguous slowdown across almost every major metric.
Payroll growth — perhaps the most important number — decelerated on a three-month basis to the least since January 2021.
The unemployment rate rose to 4.1%, the highest since November 2021. And wage growth cooled to 3.9%, the slowest since May 2021.
For Federal Reserve Chair Jerome Powell and his colleagues, the numbers will be hard to ignore.
Just days before the report, at a conference hosted by the European Central Bank, Powell described the US job market as “strong,” though he also hinted it may be approaching an inflection point of sorts.
Combine the latest trends in the labor-market data with the recent slowdown in the inflation numbers, and it’s no surprise that investors are currently betting the US central bank will opt for interest-rate cuts in September and December.
Testimony Week
The Fed chief heads to Capitol Hill on Tuesday and Wednesday for semiannual testimony before Congress, and is expected to be grilled by Democratic lawmakers wondering why he hasn’t already begun easing monetary policy.
How Powell chooses to characterize the jobs picture after Friday’s report will be key in helping cement expectations for a September rate cut.
There’s only one more policy meeting between now and then — concluding on July 31 — and if Fed officials think they’ll be ready to make a move in September, the upcoming meeting will be their last chance to offer a formal advance signal to that effect.
Source: Bloomberg
