When will the Fed shift focus to the job market?
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When will the Fed shift focus to the job market?
This being the oil shock from the war in the Middle East. Fed Chair Jay Powell on what we do and don't know about the economy. From American Public Media, this is Marketplace.
In Denver, I'm Amy Scott, in for Kai Risdahl. It's Wednesday, March 18th. Good to have you with us. Today, the Fed surprised no one by keeping its benchmark interest rates steady at a target range of 3.5% to 3.75%. Also no surprise, the shadow cast over the proceedings by the U.S.-Israeli war in the Middle East. In his second-to-last scheduled press conference as Fed chair, Jerome Powell said economic growth is strong, unemployment is still low, inflation is still higher than the Fed would like as one-time hits from tariffs continue to work their way through the economy. And he said it's too soon to know how the recent spike in oil prices will play out and whether the Fed will need to respond. And if you look at total inflation, sorry, total core inflation, it's about 3%.
And some big chunk of that, between a half and three quarters, is actually tariffs. So we're looking for progress on that. The question of whether we look through the energy inflation doesn't really arise until we have kind of checked that box. The Fed has two primary goals, stable prices and maximum employment. So Powell talked about the difficult balancing act between keeping interest rates high enough to tamp down inflation without hurting the job market. We are balancing these two goals in a situation where the risks to the labor market are to the downside, which would call for lower rates, and the risks to inflation are to the upside, which would call for higher rates, or not cutting anyway.
So we're in a difficult situation, and we feel like our framework calls on us to balance the risks. More on that balancing act coming up in the show. Powell also addressed questions about his future. While his term as Fed chair ends in May, Republican Senator Tom Tillis has said he will block confirmation of Powell's successor, Kevin Warsh. until the Justice Department ends what Tillis calls a weak and frivolous criminal investigation into Powell's handling of renovations of the Fed headquarters. Powell says if a successor is not confirmed by the end of his term, he would serve as chair pro tem. As for whether he stays on as Fed governor after that, which he can do until the end of 2028? I have not made that decision yet, and I will make that decision based on what I think is best for the institution and for the people we serve.
So we stay tuned. Wall Street today, not liking what it's seeing. We'll have the details when we do the numbers.
As promised, more now on that rock and a hard place the Fed is stuck between. Lately, we've been hearing a lot about the stable prices part of its dual mandate because they're not very stable right now.
What are the current inflation rates and their implications?
Consumer price inflation was still hovering above the Fed's target of 2% even before the latest oil shock from the war on Iran. But what about maximum employment? Well, achieving that could also be a challenge for the Fed, with a job market that's lately been slowing down or maybe even stalling out. Marketplace's Mitchell Hartman has that part of the story. Let's start with how is the labor market doing? Here's Joe Bersuelis at consulting firm RSM. For some time, it's been clear the market has weakened significantly. Over the last 12 months, the economy added 156,000 jobs. Over the previous year, it added more than a million. But the job market has stabilized quite a bit recently, says Christine Cooper at CoStar Group.
You know, we had some job losses in February, we had job gains in January, some losses in December, and it seemed to kind of offset each other. Cooper says that with the Trump administration cutting immigration and baby boomers retiring, slower job growth might not be such a big problem. As we have fewer people in labor supply and need fewer jobs to be added each month, But with little net job growth, John Lear at polling firm Morning Consult says, You continue to see people not being able to find jobs once they were laid off.
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Chapters
5 chapters
1
When will the Fed shift focus to the job market?
0:02–3:30
2
What are the current inflation rates and their implications?
3:30–9:40
3
How is Jerome Powell balancing inflation and employment?
9:40–14:52
4
What is the current state of the job market?
14:52–20:36
5
Why are vegetable prices experiencing significant spikes?
20:36–25:14