"Fed's Mouthpiece": The slowdown in the labor market will test the Fed's refusal to budge on interest rate policy.

On August 1, "Fed mouthpiece" Nick Timiraos stated that the slowdown in employment over the past three months may have opened the door for Fed officials to consider a rate drop at their next meeting in September. At the very least, this highlights the difficult balance they face amid an economic slowdown and rising inflation pressures. Because the labor market had previously shown robust employment growth, Fed officials felt secure in keeping interest rates unchanged this year. However, the significant downward revisions to employment data for May and June changed that situation. Fed officials had previously indicated that they had reduced their focus on overall employment growth, as it had been declining alongside a slowdown in labor force growth. When labor supply decreases, even if employment growth slows, the unemployment rate may remain stable or decline. However, Fed Chair Powell pointed out this week that the stability of the unemployment rate may mask underlying weakness — this balance is essentially fragile when a reduction in job seekers coincides with a decline in job vacancies. He mentioned the "downside risks" of the labor market six times at the press conference, suggesting that actual weakness may provide justification for policy easing.