Concerns mount over Federal Reserve's pace of rate cuts amid slowing U.S. job growthConcerns mount over Federal Reserve's pace of rate cuts amid slowing U.S. job growth
(MENAFN) A significant decline in U.S. job growth for July has sparked concerns that the Federal Reserve may be moving too slowly in reducing interest rates, potentially risking the very recession it aims to prevent. The latest U.S. jobs report, released on Friday, revealed that the Economy added only 114,000 jobs in July, a stark contrast to the average monthly increase of 215,000 jobs over the past year. Additionally, the unemployment rate rose by 0.2 percentage points to 4.3 percent, triggering the Sahm rule, which indicates a recession warning when the three-month average unemployment rate is half a percentage point above its 12-month low. This rapid rise in unemployment is a strong indicator of a looming economic downturn.
This troubling data arrived just two days after the Federal Reserve chose not to lower its benchmark interest rate, which has been maintained at a 23-year high of 5.25 percent to 5.5 percent since July. Federal Open Market Committee (FOMC) Chairman Jerome Powell justified the decision by stating that more evidence was needed to confirm that inflation is returning to the 2 percent target before making any policy changes. Powell emphasized his reluctance to see further weakening in the labor market.
A rate cut is being considered for the next meeting in September. However, economists argue that the Federal Reserve will need to act more decisively than it would have if it had begun lowering rates earlier. Mark Zandi, chief economist at Moody’s, criticized the Fed's timing, stating, "They made a mistake. They should have cut rates months ago. A quarter-point cut in September doesn’t seem like enough. It should be a half-point cut, a clear signal that they’re going to be more aggressive in normalizing rates than they’ve been signaling." This sentiment reflects growing concern that the Fed's cautious approach may not be sufficient to mitigate the risks of a recession, underscoring the urgency for more proactive measures in monetary policy.
MENAFN05082024000045015682ID1108516814
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.