Fed's Goolsbee: US labor market still looks stable
Federal Reserve Bank of Chicago President Austan Goolsbee said on Friday that the labor market appears largely stable despite a bumpy series of data on the US jobs landscape, per Bloomberg. Goolsbee further stated that any pause in the Fed’s rate-cutting cycle would come if conditions in inflation or the labor market change.
Key quotes
To me that feels like in that sustainable, full employment kind of place.
227K is a big number but need to look at averages.
Jobs market cooling to something like sustainable full employment, want to keep it there.
Last few months, the jobs number feels like a sustainable, full employment pace.
Measurements like the ratio of vacancies to the number of unemployed people show balance in the jobs market.
What happens with immigration will have a very significant impact on the size of the labor force.
Says he won't pre-commit to the December decision, still, several data points are to come.
Overall progress on inflation is still encouraging.
A single month's data is not reliable but if the household survey were to show steady deterioration, the Fed would have to look at it more closely.
It's likely that goods prices will return to deflation, services continue in the right direction, and market data on housing suggests coming improvement there.
Will be watching rate-sensitive sectors and, lagged impact of mon pol for signs that neutral is approaching.
Economic conditions will determine the pace of cuts from here.
Market reaction
The US Dollar Index (DXY) is trading 0.02% higher on the day at 106.01, as of writing.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.