Labor markets appear balanced because both supply of and demand for workers have markedly slowed. That unusual balance raises downside employment risks that can materialize quickly through sharply higher layoffs and rising unemployment. Structural distortions from tariffs, deportations, and immigration crackdowns are warping labor supply. A weakening dollar and tariffs pose potential new inflation drivers. Cutting interest rates prematurely could backfire if those forces keep inflation sticky. Such a misstep could result in a stop-go monetary policy pattern similar to the 1970s. Markets reacted to signals suggesting possible imminent rate cuts, while uncertainty over upcoming employment data remains.
"curious kind of balance that results from a marked slowing in both the supply of and demand for workers."
"This unusual situation suggests that downside risks to employment are rising,"
"And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment."
"Including the word 'curious' - I mean, that's just a somewhat unusual expression,"
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