Fed Officials: Job Slowdown Won't Alter Rate Path, Rate Cut Expectations Remain Stable for Now
According to an exclusive report by Caixin Finance APP, the July US job report unexpectedly showed a slowdown, prompting further concerns from Fed officials about the economic outlook. Atlanta Fed Chairman Bostic stated on Friday that the latest job data is worrying and may indicate that the US economy is weakening more broadly. He noted during the interview that this job report "has significant implications" and pointed out that previous data had been downwardly revised to a "substantial degree."
The latest data from the US Labor Department shows that nonfarm employment added only 73,000 jobs in July, far below market expectations of 110,000. Moreover, June's job data was significantly downwardly revised from over 200,000 to just 14,000.
Despite this, Bostic emphasized that the labor market "is still very good in many respects" and would not alter his decision on interest rates for the FOMC meeting. He noted that these job data may suggest that economic risks are "tending towards balance," but stressed that current inflation is still far from the Fed's 2% target, with employment market deviations being relatively small.
Regarding market expectations of a potential rate cut in 2025, Bostic was cautious, saying "it's not yet ready" to increase rate-cut expectations. He also noted that companies may need up to 12 months to adjust their pricing strategies in the current complex economic environment, stating, "I think we're now in an extremely difficult environment."
Manufacturing data further reinforced signals of economic weakness. The same-day data from the Institute for Supply Management showed that the July manufacturing purchasing managers' index fell to 48.0 from June's 49.0, continuing a five-month streak below the neutral line, indicating that manufacturing has remained in contraction mode.
Cleveland Fed Chair Hamrick also noted during an interview with Bloomberg that despite the disappointing job report, the labor market remains "healthy overall." She believes that the slowdown in nonfarm employment growth is partly reflected in the US's recent decline in immigration numbers.
Hamrick further stated that the unemployment rate as one of our most reliable indicators remains within its normal range over the past year, and therefore does not constitute a warning. She also supports this week's Fed decision to maintain interest rates unchanged and noted that current inflation levels remain significantly above the Fed's 2% target.
"This is an extremely complex period," Hamrick said, "and policy-making officials' divisions are not unusual."