Recent data show the U.S. labor market is still strong but has been weakening, said Chicago Fed President Austan Goolsbee, on Friday.
In a CNBC interview shortly after the U.S. Labor Department reported that the economy added 209,000 jobs in June, Goolsbee said that he didn’t want make too much of one month’s data.
See: U.S. adds just 209,000 jobs in June. Smallest gain since 2020 unlikely to stop Fed rate hike
Stepping back, he said the bigger picture shows some softening in the jobs market, for instance, the ratio of vacancies to unemployed workers is coming down.
“The trend over some number of months has been the hours worked going down — so the total hours worked in the economy is not up as much as the total number of jobs,” Goolsbee said.
“We’re getting to a more sustainable place, which is what we need to do, for inflation. Overall, the job market is outstanding and it is getting back to a balanced, sustainable path,” he added.
Goolsbee, who is a voting member of the Fed’s interest-rate committee this year, said the 0.4% increase in hourly wages —which was above consensus of a 0.3% gain— was a lagging indicator and was not a sign of higher inflation to come.
Goolsbee has been dovish on monetary policy in recent weeks, signaling he is in the camp that argues the Fed is almost done with interest rate hikes.
One question that divides the hawks from the doves on the Fed is whether the economy is going to slow in coming weeks because of the “lagged” effect of the rapid rate hikes over the last 15 months.
If the economy is set to slow on its own, the Fed won’t have to raise rates much higher.
Hawks on the Fed argue that the talk of “lags” is overstated and the economy seems to be powering ahead.
Goolsbee said he is in the camp that thinks the lags will be powerful.
There is “a decent chance that there is a fair amount coming through the pipeline,” he said.
Goolsbee added that he wondered whether the hawks think that Fed policy has been ineffective given how strong the economy remains after 500 basis points of hikes.
Asked about a recession, the Chicago Fed president said it would be “a triumph” if the Fed could bring inflation down without causing a severe downturn.
He said the Fed was on the right path at the moment.
The pandemic has caused “a weird business cycle” that makes avoiding a recession a real possibility, he said.
Goolsbee said he is still undecided about what the Fed should do at its next policy meeting in less than three weeks He noted that he would pay attention to the June consumer price inflation data to be released next week.
The “main thing” the Fed wants to see is whether goods inflation is coming down, he said.
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