Thanks to outperforming supply-side dynamics, the labor market has already rebalanced. At the same time, income growth is still decelerating and the lagging bits of the inflation overshoot are finally normalizing as a result. The August jobs report should shape how much...
A 50 basis point cut should be the base case after today and further slowdowns in the remaining jobs and inflation reports between now and the September meeting may bolster the case for more drastic action this year.
Fire prevention—rather than fire fighting—is a better approach to risk management when it comes to the labor market. When it comes to unemployment risk, the Fed should be proactive and preemptive, not reactive.
With all of the softening in the labor market, it’s time for the Fed to actively discuss starting the process of rate normalization.
