Federal Reserve Chair Jerome Powell has a narrow view of the labor market. Newly appointed central banker Stephen Miran brings another viewpoint. Policymakers such as Federal Reserve Chair Powell have underscored just how foundational the unemployment rate is to the public’s perception. It’s been stuck at 4% and 4.3% since January, with the needle firmly planted on 4.3% these days. Miran takes issue with Powell’s sunny disposition, arguing that the labor market is starting to crack.
During a recent press conference, Powell stated, “The concern is that if you start to see layoffs, there won’t be a lot of hiring going on.” He recognized that though layoffs have been alarming, the economy is not headed for disaster. “Let’s remember though, the unemployment rate’s 4.3%. The economy is growing at 1.5%. So it’s not a bad economy, or anything like that,” he added.
Despite Powell’s confidence, Miran said that deepening cracks were beginning to form within the labor market. He noted that job growth has become anemic and highlighted a troubling trend: there are currently more unemployed individuals actively seeking work than available job openings. In August, the number of long term unemployed (those without a job for over 26 weeks) was at their highest since November 2021.
Miran expressed concern about the prolonged restrictive borrowing costs, stating that “the longer borrowing costs stay very restrictive, the greater the risks build up… to the employment mandate.” His remarks are consistent with a broader perspective. This ongoing perspective would have you believe that America’s labor market has gotten weak since the beginning of this year.
For example, last year when unemployment rose to 8.1 percent, the Federal Reserve responded with a substantial half-point interest rate cut. That decision was made in reaction to severe economic headwinds. This move aimed to stimulate job growth and stabilize the labor market, but current indicators suggest that the desired effects may not have materialized.
Despite conceding to some degree of softness in the labor market, Powell continues to maintain that the economic fundamentals are just too strong. The Federal Reserve is still figuring out how to calibrate monetary policy, as these and other economic drivers will increasingly influence the Fed’s actions in a changing economy.