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US Federal Reserve Chair Jerome Powell warned on Tuesday that the employment risks have increased recently, citing a sharp slowdown in job creation within the US economy.
Speaking at a conference in Philadelphia, Powell noted that while the unemployment rate remained low through August, lower immigration and labour force participation likely contributed to the slowdown in payroll gains.
Although official September jobs data is unavailable due to the government shutdown, private figures also suggest a major reduction in hiring last month.
Powell stated that the “rising downside risks to employment have shifted our assessment of the balance of risks.”
He acknowledged the challenge of navigating the tension between the Fed’s dual mandate of controlling inflation and maximising employment, noting there is “no risk-free path for policy.”
The Fed’s policymaking committee had already voted in mid-September to cut interest rates for the first time this year by a quarter point to support the flagging labour market.
Following this, officials pencilled in an additional 50 basis points of cuts this year on average, suggesting further reductions in the remaining meetings in October and December.
Futures traders currently predict a greater than 95% chance of the Fed cutting rates by an additional half-percentage point this year.
