Fed Chair Jerome Powell talks labor markets at Nashville conference
Federal Reserve Chairman Jerome Powell focused on inflation, interest rate cuts and the cooling labor market while addressing hundreds of economists and business leaders at the National Association for Business Economics conference in Nashville Monday.
“This is not a committee that feels like it’s in a hurry to cut rates quickly,” Powell said, during the luncheon address for NABE’s 66th annual conference “Finding Harmony in the Noise: Transitioning to a New Normal” at the Grand Hyatt Nashville.
His Nashville speech comes nearly two weeks after the Federal Reserve lowered its interest rate by a half percentage point on Sept. 18 — the first rate cut in four years. Powell said Monday that, as of the cut earlier this month, the Fed is looking at two more cuts through the end of the year that would total half a percentage point.
Powell said U.S. economic fundamentals are strong and the Fed’s much-discussed “soft landing” is still in sight, meaning that inflation could continue to cool without a spike in unemployment. However, unemployment has risen notably in recent months.
“It’s a reflection of our growing confidence that inflation is moving sustainably down to 2%,” Powell said. “If the economy performs as expected then that would mean we will have two more rate cuts this year. We’ll be asking ourselves: ‘Is our policy stance in place best to achieve our goals?’ We’re recalibrating policy to maintain the strength in the economy, not because of weakness in the economy.”
Powell said he looks at inflation in three categories: goods, non-housing services and housing. Of those three, housing is the only one that hasn’t softened to pre-pandemic levels yet.
However, Powell said he expects housing inflation to ease within two to four years.
“As leases turn over year upon year, you should see inflation rates start to flatten out,” he said. “It’s just going to take longer than we’ve been expecting and longer than we’ve wanted.
As inflation continues to trend lower, the Fed inches closer to reaching its long-term goal, which is around pre-pandemic inflation levels of 2%. While Powell did not note a timeline Monday, The American Bankers Association’s Economic Advisory Committee projects that goal will be met by the second quarter of 2025.
The committee of 15 chief economists said in a statement Monday that it expects the Fed to continue to cut interest rates, reducing the target federal funds rate range by an additional 150 basis points by the end of 2025.
“It’s the longer-term path that matters more, and our expectation is for the Fed’s policy rate — which is still restrictive — to reach a more neutral level by the end of next year,” economist and committee chair Luke Tilley said in a statement.
Powell assuaged concerns about the labor market as the U.S. unemployment rate rose from 3.4% at the start of this year to 4.2% in August. In the Nashville metropolitan area, though, the unemployment rate has consistently stayed below the national average, slightly rising from 2.8% in January to 3.0% at the end of July, according to the Federal Reserve Bank of St. Louis.
“Over the past year, we have continued to see solid growth and healthy gains in the labor force and in productivity,” Powell said. “Our goal all along has been to restore price stability without the kind of painful rise in unemployment that has frequently accompanied efforts to bring down inflation.”
Powell said real wages are increasing at “a solid pace,” but people searching for jobs are having a harder time finding them compared to two years ago. He said the job-finding rate has come down significantly, but it’s not at a concerning level.
“This is not a problem with excessively tight labor markets causing inflation,” Powell said. “If you’re out of work now, it’s going to be harder to find a job than it was two years ago when the labor market was much more tight. By so many measures, the labor market is still solid but it has cooled. We don’t think labor market conditions need to cool further.”
Powell spoke at the second day of the NABE conference, which ran from Sept. 29 to Oct. 1, and said he couldn’t stay overnight in Nashville. But he shared a few items he would like to check off of his Music City bucket list.
“I would certainly visit the Patsy Cline Museum and the Johnny Cash Museum,” Powell said. “There’s a band called the Time Jumpers, and it’s the best studio musicians in Nashville, and they play at 3rd and Lindsley. Vince Gill sits in as the lead singer. I’ve been a fan of that band for 10-15 years and never seen them live.”
By the time Powell mentioned his love for the band, the Time Jumpers’ Monday night concert had already sold out.
Hadley Hitson covers trending business, dining and health care for The Tennessean. She can be reached at [email protected]. To support her work, subscribe to The Tennessean.
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