American Economics Thread

[HighGround]

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The Federal Reserve's decision to cut this month was influenced by weaker data from the labor market, with a disappointing July jobs report followed by a Labor Department data revision that showed the U.S. added

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in the 12 months ended March 2024 than originally reported.

To be sure, the job market is far from the supercharged hiring during the pandemic, when employers sought to add workers while also struggling with labor market shortages, which caused wages to spike. But Powell noted that the current unemployment rate of 4.2% is historically low, and that while hiring is moderating, the labor market remains fairly solid.

"Anything in the low fours is really a good labor market," Powell said. "Participation is at high levels."

But in cutting interest rates by 0.50 percentage points, the Fed wants to ensure the labor market doesn't slow from here. "We believe, with an appropriate recalibration of our policy, that we can continue to see the economy growing and that will support the labor market," Powell noted.

I don't really know what the point is tbh. Inflation is still a problem insofar that we're not at the 2% target yet, and ideally we probably want to be ~1% inflation for the forseeable future. 4.2% unemployment is strong, especially since the labor participation rate has been steadily creeping upwards.



It's okay to have >5% unemployment. That's not a sign of a recession and it doesn't mean that it'll start a chain reaction either. In fact, higher unemployment might be "healthier" and more sustainable in a sense that it simply represent a slow churn of low-quality jobs to higher-quality jobs.

How can we even really determine if we're at "full employment" when so many companies are still fat from the Covid era easy money? IMO, this is kinda dumb move by the Fed. Holding rates steady or raising them was actually a good thing and allowing things to stabilize. Unsustainable companies were going bust, and better businesses were getting rewarded for their financial prudence.

If I were a cynical man I'd say that the Fed is just laying up a shot for Kamala Harris and Joe Biden, but I don't think that's what's going on. I think the Fed really is unhealthily obsessed with the wrong metrics. GDP and unemployment isn't the end-all, be-all. A recovering economy might even contract because in the long-term, that's what's healthy for everyone.