Fed policymakers are open to more easing after US job growth slows
New York — Two Federal Reserve policymakers, including one who opposed interest-rate cuts in 2019, have signalled they are open to considering additional easing after data showed on Friday that US job growth slowed in September.
Boston Fed president Eric Rosengren, who has twice dissented in favour of keeping borrowing costs unchanged, said he has an “open mind” on monetary policy and will watch consumer spending closely for any sign that economic growth is falling below its long-run pace of about 1.7%.
He does not want to prejudge the Fed’s next rate decision, due on October 30, he said.
In New Orleans, Atlanta Fed president Raphael Bostic said that “depending on how it plays out, there may be more that we need to do” on monetary policy, even as he remains “pretty optimistic” on the economy.
“The economy has performed better, but it has started to fall back,” he said at the Tulane Business Forum on Friday. “Some of that was expected. The question is, are we going to get to a soft landing or are we going to a much more steep decline? That is something we are still wrestling with and trying to keep our finger on.”
Fed chair Jerome Powell did not give any signals on Friday about whether he would favour another rate cut at upcoming meetings in October and December. In a brief speech at a Fed Listens event, he emphasised the importance of continuing the 10-year-old expansion.
While the economy is in “a good place” now, there are risks, and “our job is to keep it there as long as possible,” Powell said in Washington. He emphasised the importance of maintaining “our historically strong job market”, which is benefiting low- and moderate-income communities.
Nonfarm payrolls expanded 136,000 in September, according to a US labour department report on Friday that missed the median estimate of economists. That brought the average gain this year to 161,000, compared with 223,000 throughout 2018.
Average hourly earnings, moreover, rose 2.9% from a year earlier, the weakest rate since mid-2018.
The unemployment rate declined to a fresh half-century low of 3.5%, with the pace of hiring remaining above what’s needed to accommodate population growth. And pay for production and nonsupervisory workers held up better than the overall numbers.
“We’re getting to the point where we’re getting about the kind of employment growth I would expect in a stable economy,” Rosengren said. The question is whether things weaken from here, he said.
Investors still expect the Fed to make its third consecutive reduction in borrowing costs at the end of October, though they pared bets slightly after the jobs data.
Rosengren’s comment that he is watching consumer spending suggests two key reports will be important: September retail sales out on October 16, and third-quarter GDP due hours before the Fed’s October 30 decision.