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"...boosted expectations that the Federal Reserve will cut interest rates in September to stimulate the economy" The new unemployment rate is 4.3% That's above

"...boosted expectations that the Federal Reserve will cut interest rates in September to stimulate the economy" The new unemployment rate is 4.3% That's above the Fed's 4% target for full employment, but not all that high above it. By contrast, inflation is about 3% -- a full percentage point above the target of 2%, and 50% higher. Lowering target rates is supposed to lower unemployment and raise inflation. Once you hit full employment, additional money for wages increases money supply without increasing product supply. The Fed, of course, has more precise models than I've just described. But these numbers suggest to me that the Fed should leave rates as they are; they aren't any kind of emergency or pending emergency. The market is at or near record highs; it doesn't need its bubble expanded. I know the the Fed is under political pressure because politicians like soaring stock markets. And the pressure is now verging on threats. But it still seems unlikely that the Fed will cave quite so soon when the numbers say to do just the opposite.

A_Duck 1y ago
Central Bank interest rate setting has a long lag time. You need to turn the wheel 12-18 months before the car turns.
- matwood 1y ago
  Sure, which is why they were already on track to cut again as inflation was coming down. That was until Trump through his tariff grenade into the mix causing the fed to take on a wait and see approach.
- mothballed 1y ago
  I'm curious, if we eliminated the central bank and let interest rates float with private banks, would it have a similar lag time? Seems like it might let the market adjust faster and match supply and demand for loans better.
  - altairprime 1y ago
    If it behaves like gas prices, then they will travel one direction instantaneously and the other direction only after months of profit are accrued. Generally most markets selling tangible goods shift prices rapidly only to the benefit of sellers; one can expect interest rates to behave accordingly.
  - jfengel 1y ago
    The Fed's job is to act counter to the trends. As the saying goes, their job is to take away the punch bowl just as the party gets going. Their goal is to keep the economy steady, rather than maximally responsive. Their mandate is for a stable business environment, and incidentally stable employment. They were established to counter the boom-and-bust cycle we saw throughout the 19th century, with bank panics every few years.
    - mothballed 1y ago
      Looks like they've been doing a bad job. They've created a pretty massive destabilization bust of the dollar, with a massive unrecovered crash since the inception of the fed [0]. Not long after the fed's inception, there was massive GDP destabilization[1], and then further boom-and-bust cycles. Unemployment cycles circa before/after fed don't look terribly different either, especially if you exclude war time. In fact there was a pretty terrible boom-bust cycle about 20 years after the fed's inception. [2] Which all does have me double checking all of this. We're getting long lag times, one giant bank bust in slow motion except distributed across all of us with USD going to zero, and even after the fed was created an awful great depression which some economists have theorized the fed even made worse. Moving back to the response time -- it was a genuine question. I have no idea. Maybe the fed speeds up response by having an endless ability to quantitatively ease. Or maybe it acts like a big flywheel. [0] https://www.oftwominds.com/photos2012/Dollar-value1776-2008a.gif https://www.oftwominds.com/photos2012/Dollar-value1776-2008a... [1]. http://visualeconsite.s3.amazonaws.com/wp-content/uploads/RealGDPperCapita-650x450.png http://visualeconsite.s3.amazonaws.com/wp-content/uploads/Re... [2] https://upload.wikimedia.org/wikipedia/commons/9/9c/US_Unemployment_1890-2009.gif https://upload.wikimedia.org/wikipedia/commons/9/9c/US_Unemp...
      - throw0101c 1y ago
        > Looks like they've been doing a bad job. Historically the last few decades have been the most stable in recorded history: * https://en.wikipedia.org/wiki/Great_Moderation https://en.wikipedia.org/wiki/Great_Moderation * https://en.wikipedia.org/wiki/Recession#United_States https://en.wikipedia.org/wiki/Recession#United_States * https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit... > They've created a pretty massive destabilization bust of the dollar, with a massive unrecovered crash since the inception of the fed [0]. The "bust of the dollar" is a valid critique if you keep your dollars literally under your mattress or literally buried in the ground. As Nick Maggiulli observed in 2022: > Hot take: This is a good thing. > No currency should be able to buy the same basket of goods over very long timespans through hoarding. If you want to retain the purchasing power of your money, it should participate in society via investment. * https://twitter.com/dollarsanddata/status/1592651809750798336 https://twitter.com/dollarsanddata/status/159265180975079833... A follow-on from Barry Ritzholtz: > Nick is right: Cash is a medium of exchange, not a store of value. > Leave assets in dollars since 1913, your investing incompetency cost your estate/foundation a 99% loss. Invest cash in stocks, real estate, or other risk assets + your returns are up more than 10,000%. * https://twitter.com/Ritholtz/status/1593227389156622336#m https://twitter.com/Ritholtz/status/1593227389156622336#m Just putting your money into T-Bills would have kept up with inflation.
super256 1y ago
I understood Powell in Jackson Hole that the FED is dropping the 2% inflation target. "The ELB is not binding anymore." https://m.youtube.com/watch?v=CI3o6hi3zF0&t=808s&pp=2AGoBpACAQ%3D%3D https://m.youtube.com/watch?v=CI3o6hi3zF0&t=808s&pp=2AGoBpAC...
- klipklop 1y ago
  Goodbye middle class wealth I guess...
sgerenser 1y ago
Well, apparently the market disagrees. Futures are now pointing to a 100% chance of at least a 25 basis point cut at the next meeting, and the chance of a 50 basis point cut went from 0 to 11.6%: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...
- deleted 1y ago
  [deleted]
- jfengel 1y ago
  I think the market is being irrational. But you know what they say about that.
  - johnnyanmac 1y ago
    What do they say about that? On one hand, it's beyond clear by now that these numbers are always much more optimistic than usual. We just say June and July revised down to negative 10,000 or so. And even then those jobs are inflated by gig work that can barely make ends meet. On the other hand, I don't think hyper inflation is the solution to the recession we are seemingly heading towards at this rate. Seems like something is going to give. Sadly doesn't seem to be the billionarires being taxed properly./
    - Tadpole9181 1y ago
      > What do they say about that? The market can stay irrational longer than you can stay solvent.
    - mizzao 1y ago
      > What do they say about that? "The market can stay irrational longer than you can stay solvent".
xg15 1y ago
If both claims are true - unemployment rate is only 0.3% above the target AND unemployment rate is the highest in 4 years - then the only logical conclusions can be that either the unemployment rate has been exceptionally stable in the last years (or there was too little unemployment?), or 0.3% is in fact a significant deviation despite the number appearing small.
- jfengel 1y ago
  It's the former. The unemployment rate for the previous four years was pretty good and quite stable. 0.3% is not a large deviation. Here's historical data: https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE During recessions, the number goes to around 10%. That's where it was in the wake of the 2007 crash. It fell pretty much consistently after that -- except for an enormous but short surge during COVID lockdowns. It bottomed out around 3.5% -- below the Fed target, and they raised rates to try to fix that.
adverbly 1y ago
Let's be honest: the trouble here is that both of those numbers are wrong. They have been changing and adding exceptions to the basket of goods measuring inflation for many years now. Unemployment statistics have a long series of problems that have to do with considering who is counted. The current administration is actively putting pressure on the staff publishing these numbers and replacing key stats people. You gain a competitive power advantage through information asymmetry. It comes at great cost to the overall economy but it seems to be too juicy for politicians to ignore at this point.
- gilbetron 1y ago
  You are utterly wrong, and you can easily read about it and find the process behind all of the numbers. The current administration just hates facts that go against their narrative and so are installing yes-men to give the "facts" they want them to give.
  - drudolph914 1y ago
    there is a lot of half correct and half in-correct information in this thread. it might be worth reading some of the articles im linking the high-level facts are 1.) unemployment and number of available jobs is bad right now, and inflation never got back down to 2% after covid. So Powell made the announcement to lower interest rates. this effect will raise inflation, but create more jobs - which is the correct and more important thing to focus on right now on top of this, tariffs are making things worse for the average american. based on what powell is saying, the current estimates claim the tariff's alongside the planned increase in inflation will lead to about a 20% increase in prices for the average consumer, but this one time 20% increase is better than having no jobs! 2.) the government has been overestimating the amount of available jobs for 10+ years. A large part of why this is happening is because of the gig economy an example of what I mean is if you sign up to be an uber driver, uber registers you, the driver, as its own company with US government. this kind of thing is fine for uber, but the government doesn't count you becoming an uber driver as 1 new job - they were counting it as roughly 7 newly available jobs. this is because each new company created in the US roughly brings on 7 employees. larger private financial institutions were correcting for this, but the department of labor statistics hasn't corrected for this. this means banks and private institutions have had better data than the government on the job market for years and were calculating that in to the stock market 3.) to add another layer of confusion, the government calculates the unemployment rate by counting the number of US citizens that file for unemployment checks, but many people found it easier/faster to get a gig economy job in between full time jobs - rather than waiting a 1+ month(s) to get on unemployment checks. this means that the number of people who are unemployed is way higher/worse than what the government is reporting. what this means is that method used to count available jobs AND unemployment are wildly wrong - there are less available jobs and more people unemployed by about 5-7x what was reported this summer. On top of that, if you look at states where there are stricter/more requirements to become an uber driver, it actually shows the unemployment rate in those states is much higher than expected. the avg unemployment rate amongst these states are probably more accurate to how bad the unemployment situation is in the US overall 4.) the current US administration has fired a lot of employees, which has led to even worse labor statistics/estimates compared to previous years 5.) trump specifically has actually caused a lot of confusion for the average person trying to understand this year's US economic status because we use to have quarterly checkins in June, but as of the past 2 years we've been doing it in July. The way the government tracks important economic indicators starts with the US gov announcing their initial stats, but these numbers often over estimate; so the US gov will often have a large correction the following month trump this year has been making claims like, "this is the best GDP we've seen in July of recent years!" but of course it's the best because he is intentionally doing the comparison wrong to ELI5 what I mean, June 2024 had the over estimates stats and the US government would correct them in July 2024. but now in 2025, July is the month with over estimate, and August will be the month we correct the estimates what we should be doing is comparing august 2025's GDP with July of 2024's GDP. doing so would show you that GDP is not better, but essentially stagnant trump and his administration are intentionally not doing the comparison correctly for better sounding headlines [0] dept of labor statistic report- https://www.bls.gov/news.release/pdf/empsit.pdf https://www.bls.gov/news.release/pdf/empsit.pdf [1] Deep Dive: The US Jobs Market Is Much Weaker Than it Appears - https://www.financialsense.com/blog/20854/deep-dive-us-jobs-market-much-weaker-it-appears https://www.financialsense.com/blog/20854/deep-dive-us-jobs-... EDIT - typos
oramit 1y ago
With the current data we have there's simply no good policy reason to cut interest rates. Inflation is either staying elevated or slightly increasing. https://www.cnbc.com/2025/08/29/pce-inflation-report-july-2025.html https://www.cnbc.com/2025/08/29/pce-inflation-report-july-20... The jobs reports are bad, yes, but cutting interest rates is not gonna have any effect there. Companies are actively trimming their workforce or not hiring for macroeconomic/policy reasons like tariffs that have nothing to do with the FED. There simply isn't any meaningful connection between unemployment and rate cuts. No executive is sitting around waiting for a .25 rate cut to hire a bunch of employees when all the other economic data is flashing red. Hell, even the FED themselves say this and point out correctly that lowering interest rates to "help" employment doesn't work especially in an elevated inflation environment. "When discussing this trade-off, it is important to emphasize that, since the stagflation of 1970s, the consensus position among macroeconomists is that loose monetary policy can easily lead to high inflation without persistent gains in lowering unemployment rates. Therefore, a guiding principle of post-1980s monetary policy has been that it should not be used to try to achieve permanently higher employment." https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-08 https://www.richmondfed.org/publications/research/economic_b... But of course, we have already passed through the authoritarian looking glass and the Trump regime doesn't even bother to lie badly about their justifications at this point. Trump wants lower interest rates therefore they should happen. Anything else is noise.
EasyMark 1y ago
I think rates are simply too high and they are going to come down due to political and public pressure.
- myvoiceismypass 1y ago
  Why do you think rates are simply too high? They do not seem high by historical standards: https://www.macrotrends.net/2015/fed-funds-rate-historical-chart https://www.macrotrends.net/2015/fed-funds-rate-historical-c...

A_Duck 1y ago

Central Bank interest rate setting has a long lag time. You need to turn the wheel 12-18 months before the car turns.

matwood 1y ago
Sure, which is why they were already on track to cut again as inflation was coming down. That was until Trump through his tariff grenade into the mix causing the fed to take on a wait and see approach.
mothballed 1y ago
I'm curious, if we eliminated the central bank and let interest rates float with private banks, would it have a similar lag time? Seems like it might let the market adjust faster and match supply and demand for loans better.
- altairprime 1y ago
  If it behaves like gas prices, then they will travel one direction instantaneously and the other direction only after months of profit are accrued. Generally most markets selling tangible goods shift prices rapidly only to the benefit of sellers; one can expect interest rates to behave accordingly.
- jfengel 1y ago
  The Fed's job is to act counter to the trends. As the saying goes, their job is to take away the punch bowl just as the party gets going. Their goal is to keep the economy steady, rather than maximally responsive. Their mandate is for a stable business environment, and incidentally stable employment. They were established to counter the boom-and-bust cycle we saw throughout the 19th century, with bank panics every few years.
  - mothballed 1y ago
    Looks like they've been doing a bad job. They've created a pretty massive destabilization bust of the dollar, with a massive unrecovered crash since the inception of the fed [0]. Not long after the fed's inception, there was massive GDP destabilization[1], and then further boom-and-bust cycles. Unemployment cycles circa before/after fed don't look terribly different either, especially if you exclude war time. In fact there was a pretty terrible boom-bust cycle about 20 years after the fed's inception. [2] Which all does have me double checking all of this. We're getting long lag times, one giant bank bust in slow motion except distributed across all of us with USD going to zero, and even after the fed was created an awful great depression which some economists have theorized the fed even made worse. Moving back to the response time -- it was a genuine question. I have no idea. Maybe the fed speeds up response by having an endless ability to quantitatively ease. Or maybe it acts like a big flywheel. [0] https://www.oftwominds.com/photos2012/Dollar-value1776-2008a.gif https://www.oftwominds.com/photos2012/Dollar-value1776-2008a... [1]. http://visualeconsite.s3.amazonaws.com/wp-content/uploads/RealGDPperCapita-650x450.png http://visualeconsite.s3.amazonaws.com/wp-content/uploads/Re... [2] https://upload.wikimedia.org/wikipedia/commons/9/9c/US_Unemployment_1890-2009.gif https://upload.wikimedia.org/wikipedia/commons/9/9c/US_Unemp...
    - throw0101c 1y ago
      > Looks like they've been doing a bad job. Historically the last few decades have been the most stable in recorded history: * https://en.wikipedia.org/wiki/Great_Moderation https://en.wikipedia.org/wiki/Great_Moderation * https://en.wikipedia.org/wiki/Recession#United_States https://en.wikipedia.org/wiki/Recession#United_States * https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit... > They've created a pretty massive destabilization bust of the dollar, with a massive unrecovered crash since the inception of the fed [0]. The "bust of the dollar" is a valid critique if you keep your dollars literally under your mattress or literally buried in the ground. As Nick Maggiulli observed in 2022: > Hot take: This is a good thing. > No currency should be able to buy the same basket of goods over very long timespans through hoarding. If you want to retain the purchasing power of your money, it should participate in society via investment. * https://twitter.com/dollarsanddata/status/1592651809750798336 https://twitter.com/dollarsanddata/status/159265180975079833... A follow-on from Barry Ritzholtz: > Nick is right: Cash is a medium of exchange, not a store of value. > Leave assets in dollars since 1913, your investing incompetency cost your estate/foundation a 99% loss. Invest cash in stocks, real estate, or other risk assets + your returns are up more than 10,000%. * https://twitter.com/Ritholtz/status/1593227389156622336#m https://twitter.com/Ritholtz/status/1593227389156622336#m Just putting your money into T-Bills would have kept up with inflation.

super256 1y ago

I understood Powell in Jackson Hole that the FED is dropping the 2% inflation target. "The ELB is not binding anymore." https://m.youtube.com/watch?v=CI3o6hi3zF0&t=808s&pp=2AGoBpACAQ%3D%3D https://m.youtube.com/watch?v=CI3o6hi3zF0&t=808s&pp=2AGoBpAC...

klipklop 1y ago
Goodbye middle class wealth I guess...

sgerenser 1y ago

Well, apparently the market disagrees. Futures are now pointing to a 100% chance of at least a 25 basis point cut at the next meeting, and the chance of a 50 basis point cut went from 0 to 11.6%: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...

deleted 1y ago
[deleted]
jfengel 1y ago
I think the market is being irrational. But you know what they say about that.
- johnnyanmac 1y ago
  What do they say about that? On one hand, it's beyond clear by now that these numbers are always much more optimistic than usual. We just say June and July revised down to negative 10,000 or so. And even then those jobs are inflated by gig work that can barely make ends meet. On the other hand, I don't think hyper inflation is the solution to the recession we are seemingly heading towards at this rate. Seems like something is going to give. Sadly doesn't seem to be the billionarires being taxed properly./
  - Tadpole9181 1y ago
    > What do they say about that? The market can stay irrational longer than you can stay solvent.
  - mizzao 1y ago
    > What do they say about that? "The market can stay irrational longer than you can stay solvent".

xg15 1y ago

If both claims are true - unemployment rate is only 0.3% above the target AND unemployment rate is the highest in 4 years - then the only logical conclusions can be that either the unemployment rate has been exceptionally stable in the last years (or there was too little unemployment?), or 0.3% is in fact a significant deviation despite the number appearing small.

jfengel 1y ago
It's the former. The unemployment rate for the previous four years was pretty good and quite stable. 0.3% is not a large deviation. Here's historical data: https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE During recessions, the number goes to around 10%. That's where it was in the wake of the 2007 crash. It fell pretty much consistently after that -- except for an enormous but short surge during COVID lockdowns. It bottomed out around 3.5% -- below the Fed target, and they raised rates to try to fix that.

adverbly 1y ago

Let's be honest: the trouble here is that both of those numbers are wrong. They have been changing and adding exceptions to the basket of goods measuring inflation for many years now. Unemployment statistics have a long series of problems that have to do with considering who is counted. The current administration is actively putting pressure on the staff publishing these numbers and replacing key stats people. You gain a competitive power advantage through information asymmetry. It comes at great cost to the overall economy but it seems to be too juicy for politicians to ignore at this point.

gilbetron 1y ago
You are utterly wrong, and you can easily read about it and find the process behind all of the numbers. The current administration just hates facts that go against their narrative and so are installing yes-men to give the "facts" they want them to give.
- drudolph914 1y ago
  there is a lot of half correct and half in-correct information in this thread. it might be worth reading some of the articles im linking the high-level facts are 1.) unemployment and number of available jobs is bad right now, and inflation never got back down to 2% after covid. So Powell made the announcement to lower interest rates. this effect will raise inflation, but create more jobs - which is the correct and more important thing to focus on right now on top of this, tariffs are making things worse for the average american. based on what powell is saying, the current estimates claim the tariff's alongside the planned increase in inflation will lead to about a 20% increase in prices for the average consumer, but this one time 20% increase is better than having no jobs! 2.) the government has been overestimating the amount of available jobs for 10+ years. A large part of why this is happening is because of the gig economy an example of what I mean is if you sign up to be an uber driver, uber registers you, the driver, as its own company with US government. this kind of thing is fine for uber, but the government doesn't count you becoming an uber driver as 1 new job - they were counting it as roughly 7 newly available jobs. this is because each new company created in the US roughly brings on 7 employees. larger private financial institutions were correcting for this, but the department of labor statistics hasn't corrected for this. this means banks and private institutions have had better data than the government on the job market for years and were calculating that in to the stock market 3.) to add another layer of confusion, the government calculates the unemployment rate by counting the number of US citizens that file for unemployment checks, but many people found it easier/faster to get a gig economy job in between full time jobs - rather than waiting a 1+ month(s) to get on unemployment checks. this means that the number of people who are unemployed is way higher/worse than what the government is reporting. what this means is that method used to count available jobs AND unemployment are wildly wrong - there are less available jobs and more people unemployed by about 5-7x what was reported this summer. On top of that, if you look at states where there are stricter/more requirements to become an uber driver, it actually shows the unemployment rate in those states is much higher than expected. the avg unemployment rate amongst these states are probably more accurate to how bad the unemployment situation is in the US overall 4.) the current US administration has fired a lot of employees, which has led to even worse labor statistics/estimates compared to previous years 5.) trump specifically has actually caused a lot of confusion for the average person trying to understand this year's US economic status because we use to have quarterly checkins in June, but as of the past 2 years we've been doing it in July. The way the government tracks important economic indicators starts with the US gov announcing their initial stats, but these numbers often over estimate; so the US gov will often have a large correction the following month trump this year has been making claims like, "this is the best GDP we've seen in July of recent years!" but of course it's the best because he is intentionally doing the comparison wrong to ELI5 what I mean, June 2024 had the over estimates stats and the US government would correct them in July 2024. but now in 2025, July is the month with over estimate, and August will be the month we correct the estimates what we should be doing is comparing august 2025's GDP with July of 2024's GDP. doing so would show you that GDP is not better, but essentially stagnant trump and his administration are intentionally not doing the comparison correctly for better sounding headlines [0] dept of labor statistic report- https://www.bls.gov/news.release/pdf/empsit.pdf https://www.bls.gov/news.release/pdf/empsit.pdf [1] Deep Dive: The US Jobs Market Is Much Weaker Than it Appears - https://www.financialsense.com/blog/20854/deep-dive-us-jobs-market-much-weaker-it-appears https://www.financialsense.com/blog/20854/deep-dive-us-jobs-... EDIT - typos

oramit 1y ago

With the current data we have there's simply no good policy reason to cut interest rates. Inflation is either staying elevated or slightly increasing. https://www.cnbc.com/2025/08/29/pce-inflation-report-july-2025.html https://www.cnbc.com/2025/08/29/pce-inflation-report-july-20... The jobs reports are bad, yes, but cutting interest rates is not gonna have any effect there. Companies are actively trimming their workforce or not hiring for macroeconomic/policy reasons like tariffs that have nothing to do with the FED. There simply isn't any meaningful connection between unemployment and rate cuts. No executive is sitting around waiting for a .25 rate cut to hire a bunch of employees when all the other economic data is flashing red. Hell, even the FED themselves say this and point out correctly that lowering interest rates to "help" employment doesn't work especially in an elevated inflation environment. "When discussing this trade-off, it is important to emphasize that, since the stagflation of 1970s, the consensus position among macroeconomists is that loose monetary policy can easily lead to high inflation without persistent gains in lowering unemployment rates. Therefore, a guiding principle of post-1980s monetary policy has been that it should not be used to try to achieve permanently higher employment." https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-08 https://www.richmondfed.org/publications/research/economic_b... But of course, we have already passed through the authoritarian looking glass and the Trump regime doesn't even bother to lie badly about their justifications at this point. Trump wants lower interest rates therefore they should happen. Anything else is noise.

EasyMark 1y ago

I think rates are simply too high and they are going to come down due to political and public pressure.

myvoiceismypass 1y ago
Why do you think rates are simply too high? They do not seem high by historical standards: https://www.macrotrends.net/2015/fed-funds-rate-historical-chart https://www.macrotrends.net/2015/fed-funds-rate-historical-c...