Federal Reserve Chair Jerome Powell spoke at the Kansas City Fed’s economic symposium, discussing the cooling trend in the labor market. He noted that while the unemployment rate has risen, it remains “low by historical standards,” emphasizing that the cooling in the labor market is “unmistakable.”
Dartmouth College Economics Professor & Former Federal Reserve Economist Andrew Levin joins Catalysts to provide his outlook on Powell’s comments and the broader economic landscape.
Levin explains that there are two ways the labor market can cool: “lots of people losing their jobs” or many individuals joining the labor force. He notes that with inflation continuing to drive prices higher, it is leading to an influx of job seekers trying to “meet their expenses” — which is why the labor market is cooling.
Regarding potential rate cuts, Levin states, “I would be extraordinarily surprised if the Fed cuts by 50 bps.” While Powell indicated the Fed’s favor towards an easing cycle and maintaining a strong labor market, Levin emphasizes that the Fed is not yet “in emergency mode,” adding, “it’s not emergency, it’s a pivot.”
Levin predicts a quarter-point basis cut in September, followed by cuts at eight consecutive meetings.
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