Fed's mouthpiece: The slowdown in the job market will test the Fed's unyielding interest rate policy

PANews reported on August 1st that according to Jinshi, "Federal Reserve mouthpiece" Nick Timiraos said the slowdown in employment over the past three months may open the door for Federal Reserve officials to consider a rate cut at their next meeting in September. At the very least, this highlights the difficult balancing act they face as the economy slows and inflationary pressures rise. Fed officials felt comfortable keeping interest rates unchanged this year because the labor market had previously shown solid job growth. However, the significant downward revisions to employment data for May and June changed that dynamic. Fed officials previously stated they were less focused on overall job growth because it was declining in tandem with the slowdown in labor force growth. When the labor supply shrinks, the unemployment rate can remain stable or even decline even if job growth slows. However, Fed Chairman Powell noted this week that a stable unemployment rate could mask underlying weakness—when a decline in job seekers coincides with a decline in job openings, this balance is inherently fragile. He mentioned "downside risks" to the labor market six times during his press conference, suggesting that actual weakness could justify policy easing.