「Fed Taper Talk」: Slowdown in the job market will test the Fed's unwavering rate policy

BlockBeats News, August 1st, in the "Fed Whisperer" Nick Timiraos' view, the slowdown in employment over the past three months may have opened the door for Fed officials to consider a rate cut at their next meeting in September. At the very least, it underscores the difficult balance they face amid economic slowing and rising inflation pressures.

Due to the labor market's consistent strong job growth in the past, Fed officials had been comfortable holding rates steady this year. However, significant downward revisions to May and June job data changed this picture. Fed officials had previously indicated they were paying less attention to overall job growth as it slowed in tandem with a deceleration in the labor force participation rate.

When the labor supply shrinks, even as job growth slows, the unemployment rate may still remain stable or decrease. Yet Fed Chair Powell noted this week that the stability in the unemployment rate may mask underlying softness—a fragile balance that occurs when job seekers decline while job vacancies fall simultaneously. He mentioned the "downside risks" to the labor market six times at a press conference, suggesting that actual softness could provide a basis for policy accommodation.