Fed’s Daly Emphasizes Need to Prevent Labor Market Slowdown from Triggering Economic Downturn
San Francisco Fed President Mary Daly highlights the ongoing labor market deceleration and anticipates interest rate reductions, while stressing the importance of sustaining economic momentum.
Highlights
- Mary Daly, President of the San Francisco Fed, acknowledges a slowdown in the labor market and signals that interest rate cuts are probable, without specifying timing or magnitude.
- She emphasizes the existing economic momentum and the Fed’s role in maintaining it.
- Despite a slight rise in unemployment, Daly notes the absence of widespread, permanent layoffs in the labor sector.
Although the U.S. economy is experiencing a deceleration, the labor market remains more resilient than recent employment data might suggest, according to San Francisco Fed President Mary Daly.
Speaking at an event organized by the Hawaii Executive Collaborative, Daly stated that it is premature to determine if last Friday’s job report indicates a sharp increase in unemployment, citing the need for additional economic data. Her remarks followed a market downturn triggered by the jobs report that extended into the current week.
“I observe an economy with strong momentum, and it’s crucial that we sustain it,” Daly remarked.
Labor Market Showing Signs of Slowing, Not Decline
Daly shared insights from discussions with employers in her jurisdiction, who describe the labor market as slowing but not deteriorating.
“Companies are not engaging in layoffs; they are simply reducing their hiring pace,” Daly explained. “There is no evidence of widespread, permanent job cuts.”
She also indicated that the Federal Reserve may need to adjust interest rates as inflation decreases and unemployment rises, though she refrained from outlining a specific timeline.
“We have confirmed that the labor market is decelerating,” Daly said. “It is vital that this slowdown does not escalate into a full-blown economic downturn.”
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