Jerome Powell, the chair of the U.S. Federal Reserve, said on Thursday that job growth in the United States has slowed sharply, a shift that could give the Fed room to cut interest rates soon.
In his remarks to a banking and finance panel, Powell noted that the number of new jobs created last month fell to a level seen only during the pandemic‑era downturn. “The data now show that growth in employment has slowed far more than we expected,” he said.
The Fed’s primary job is to keep the economy stable. Powell explained that the central bank will still keep rates higher for longer than many investors predicted, but the recent dip in hiring is a signal that the labor market is not as tight as it was last year. “We’re not seeing the same surge in wages,” he said, adding that falling wages could help curb inflation.
Even as the economy shows signs of cooling, Powell also highlighted that many American workers still have jobs and many still have their paychecks. “Most people are still working and earning,” he added. But the faster slowdown in job growth could help the Fed meet its dual goals of price stability and full employment.
Many market watchers are watching Powell’s words closely. If the Fed confirms that jobs are cooling, it could support a move to cut the federal funds rate, which the central bank set at 4.75%‑5% after a lengthy series of hikes to fight inflation. A rate cut would lower borrowing costs for consumers and businesses, potentially boosting consumption and investment.
The Fed’s upcoming policy meeting in November will be a key moment for deciding whether to keep rates on hold or begin to lower them. While Powell has not ruled out cuts, he said the Bank’s decisions will be based on new data and the overall health of the economy.
In short, Powell’s warning that job growth is slowing sharply signals a possible easing of Fed policy. As the U.S. economy looks for a new balance between inflation and employment, expectations for future rate cuts are shaping market sentiment, especially among investors and borrowing households.
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