Federal Reserve officials gathered at the central bank's annual conference in Jackson Hole, Wyoming, this week can feel some relief that the U.S. unemployment rate, at 4.3%, remains low based on historical data.
The continued increase in the unemployment rate from 3.7% in January 2023 to 4.3% as of July 2024 was also accompanied by an increase of 1.2 million in the number of people looking for work something that is usually considered a positive sign for the economy but could cause the unemployment rate to rise.
Still, in recent days, Fed officials have become clearer that potential job market weakness has them ready to cut interest rates after keeping the U.S. central bank's policy rate on hold. in the range of 5.25%-5.50% for more than a year. The current level is the highest in a quarter of a century.
"Risks have changed, so discussions about a possible rate cut in September are appropriate," Minneapolis Fed President Neel Kashkari said in a recent interview with the Wall Street Journal, referring to the Fed's September 17-18 policy meeting.
Other Fed officials including San Francisco Fed President Mary Daly said in other interviews that they are increasingly confident that inflation is returning to the 2% target and that they are open to a rate cut.
The Fed is expected to cut its policy rate by a quarter of a percentage point next month. In addition, policymakers will provide updated projections showing how they believe rates and the economy are likely to grow over the course of this year and into 2025.
Fed Chairman Jerome Powell is expected to reiterate the view that the central bank will begin easing credit conditions after successfully curbing the worst inflation outbreak in 40 years when he speaks on Friday at the Kansas City Fed's Jackson Hole conference.
Recent labor market data shows why they are growing worried. U.S. Govt. reported weaker-than-expected job growth in July, with employers adding just 114,000 jobs. The July reading pulled the three-month average below the pre-pandemic trend, and raised the unemployment rate by two-tenths of a percentage point to 4.3%.
Amid still-strong consumer spending and possibly slower but still positive economic growth, the Fed is not yet ready to consider the job market in crisis.
