The Federal Reserve extended its wait-and-see approach on interest rates for the third time, citing a “solid” labor market as reason for inaction. However, new job growth data indicates that the market may not be as strong as initially thought.
According to the Labor Department, employers added just 73,000 jobs in July, below the monthly threshold needed to keep pace with population growth. The unemployment rate also rose to 4.2% from 4.1%. Furthermore, the Labor Department revised downward job gains for the prior two months, revealing anemic job growth.
The average monthly job growth from May to July is the weakest since 2009, outside of the pandemic recession in 2020. The decision has sparked dissent among Fed officials, with Governor Christopher Waller and Vice Chair Michelle Bowman casting their first dissenting votes in decades.
While some argue that the Fed may have made a mistake, others suggest that it was premature to cut rates too aggressively last year when the labor market showed signs of weakening. Cleveland Fed President Beth Hammack expressed confidence in the decision, saying that data should not be overemphasized and that the Fed’s approach is prudent.
The debate highlights the complexities of balancing inflation and labor market concerns. The Federal Reserve will continue to monitor these factors as it makes its next move on interest rates.
Source: https://edition.cnn.com/2025/08/02/economy/fed-rate-cuts-jobs