Last week, President Donald Trump nominated the president of the Council of Economic Advisors, Stephen Miran, to comply with the remaining mandate of the Governor of the Adriana Kugler Federal Reserve. Trump said Mira will serve on paper until January 31, 2026, while a search for a permanent replacement continues. The Senate will probably confirm its nomination quickly and before the September meeting of the FOMC.
If so, then there could be at least three dissidents in the FOMC if the Votes Committee to transmit a cut in the federal funds (FFR) rate in September. They will argue that a weakening labor market justifies a. There may be a new group of dissidents if the FED cuts the FFR. They could object that a rate reduces the risk of heating inflation.
The great great debate is whether the weakness in the reflection of a labor market in which the demand for labor is weakening or if there is a shortage of workers. It can be both at the same time.
On the demand side, Trump’s tariff agitation (TTT) since April may have caused many employers to postpone their hiring plans until they were safer of TTT’s impact on their businesses. If so, there should be less uncertainty about this now, and its hiring should be resumed. In this case, the Fed must wait when cutting the FFR, and dissidents will not agree.
In our opinion, the problem is mainly on the side of the labor market supply (graph). The workforce has stopped growing so far this year as a result of the very effective closure of the Trump administration border, as well as continuous deportations. In this case, the Fed must also wait when cutting the FFR since that would increase the demand for workers, exacerbating labor shortage, which would exert upward pressure on salary and pricing rates.
Of course, the case to facilitate the Fed policy improved after the weak Julio Payroll Report that included outstanding reviews of profits during May and June. In addition, duration has constantly increased this year. It has become more difficult for unemployed to find work.
The unemployment claims report showed that the dismissals remain low, as evidenced (graph). They remain in a low rank consistent with a robust labor market. However, they have been increasing this year, confirming that the unemployed remain unemployed for longer.
Keep in mind that unemployment benefits last only 26 weeks. The Office of Labor Statistics (BLS) compiles monthly data on the duration of unemployment. Julio’s data showed that 1.83 million those unemployed had been unemployed for 27 weeks or more. Continuous claims increased to 1.97 million during the week of July 25 (graph).
BLS monthly data show that the number of unemployed workers has increased this year as the duration of unemployment has increased (graph). The layoffs have remained low, as evidenced by the constant number of the unemployed for less than five weeks.
The average duration of unemployment has increased in the last three years to 24.1 weeks (graph). The FOMC would undoubtedly vote to relieve in September to reduce the duration of unemployment.
However, much will depend on inflation reports for July and August, which will be published before the FOMC meeting from September 16 to 17. We hope they get hot as a result of rates. We also hope that the August employment employment report, published in early September, shows that payroll’s use continued to improve, as it did in July, because TTT has decreased.
If so, the FOMC will probably vote to wait when cutting the FFR once more. This time, there would be at least three dissidents, compared to two at the last meeting.
Original publication
!function(f,b,e,v,n,t,s){if(f.fbq)return;n=f.fbq=function(){n.callMethod? n.callMethod.apply(n,arguments):n.queue.push(arguments)};if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version=’2.0′;n.queue=[];t=b.createElement(e);t.async=!0;t.src=v;s=b.getElementsByTagName(e)[0];s.parentNode.insertBefore(t,s)}(window, document,’script’,’
Source Link
