"The Fed cut interest rates for the third consecutive meeting, a quarter-point reduction Powell framed not as a confident pivot toward easier policy, but as a defensive move meant to keep the labor market from slipping further. He repeatedly emphasized risks to employment have risen "in recent months," and noted that behind the headline numbers, job creation may already be negative."
"Powell made the striking admission the Fed believes the official payroll figures-which have slowed sharply since the summer-are overstating job growth by roughly 60,000 per month. "Forty thousand jobs could be negative 20," he said, adding this dynamic is not well understood by the public because unemployment claims remain historically low-something both economists Mark Zandi and Claudia Sahm recently toldFortune could be giving people a false sense of security about the job market."
"It is this weakening backdrop Powell said makes the current moment "very unusual": Inflation remains elevated, but most of the remaining overshoot comes from goods categories directly affected by tariffs, as opposed to domestic economic overheating, which he said the Fed has worked hard to cool since its 2022 highs; inflation excluding tariff-affected goods is "in the low [two percent]," he said."
Policymakers face an unusual combination of tariff-driven goods inflation and a potentially weaker labor market than headline data suggests. The Fed implemented a third consecutive quarter-point rate cut framed as a defensive action to prevent further deterioration in employment. Officials estimate that official payroll figures overstate job growth by roughly 60,000 jobs per month, meaning measured job creation could already be negative. Unemployment claims remain historically low, which may obscure underlying weakness. Services inflation and wage pressures are cooling, and inflation excluding tariff-affected goods is near the low two percent range.
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