On Friday’s “PBS NewsHour,” Chicago Federal Reserve Bank President Austan Goolsbee said that if the jobs market just stopped where it is, it “would be fine.” But the Federal Reserve needs to consider that if it doesn’t “start moving apace at getting the rates back to something like normal, we’re going to increasingly have problems on the real side of the economy.” And there are “a couple of warning signs here that, as the job markets keep cooling, and if we get more months that are below what we expected like this month or they revised what were already disappointing months in the previous two months downward, the more we see that,” the more worried we “might want to be on what’s happening on the state of the economy.”
Co-host Geoff Bennett asked, “So, what’s clear from the data is that the job market is slowing down. What’s your overall read of this report and what it says about the strength of the U.S. economy?”
Goolsbee responded, “The issue that we’ve been grappling with for a little bit now is the job market is cooling, but it was started from a level that was probably too hot. So, what we need is to get it stabilized at a steady-state, full-employment kind of a level. And there [are] a couple of warning signs here that, as the job markets keep cooling, and if we get more months that are below what we expected like this month or they revised what were already disappointing months in the previous two months downward, the more we see that, the more nervous we would — we might want to be on what’s happening on the state of the economy.”
Goolsbee added, “My expectation is, what’s appropriate is multiple rate cuts over the next several meetings, and that, if you look out over the year, you only want to be this tight as a central bank if you’re afraid that the economy is overheating, and this isn’t what overheating looks like. If anything, it’s overcooking.”
Goolsbee further said, “I think we’ve got to take seriously the idea that, if you look at the long arc of the data, it’s pretty clear what’s happened, inflation’s come way down, the job market has cooled, and if we do not start moving with — start moving apace at getting the rates back to something like normal, we’re going to increasingly have problems on the real side of the economy.”
Bennett then asked, “If you look at the job revisions downward, over the last three months, we’ve been creating an average of about 115,000 jobs a month, and that’s down quite a bit from last winter. Are you confident that we’re not sliding too much and heading into a possible recession?”
Goolsbee answered, “That’s the fear. I would express — I don’t express confidence about predictions. The job of [a] central banker is to worry about everything, but that’s the primary worry, is that, with the slowing of the job creation and the rise of the unemployment rate, that it won’t stabilize at something like where it is now. If everything stopped and the unemployment rate was 4.2% and we had 150,000 jobs a month, and that just continued, that would be fine. That would be kind of a steady-state, full-employment-type rate that people have expected. The great fear is that it just keeps cooling and it gets worse. And that’s what we’ve got to try to guard against.”
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