On Friday's PBS NewsHour, Chicago Fed President Austin Goolsby said it would be “fine” if the job market stayed where it is. But the Fed needs to consider that “if we don't rapidly restore interest rates to near-normal levels, we're going to get more and more problems in the real economy.” He also said, “As the job market continues to cool, there are some warning signs that the more months we have below-expected months like this one, or further downward revisions to already disappointing performance over the past two months, the more we might want to worry about the state of the economy.”
“What's clear from the data is that the jobs market is slowing. What's your overall take on this report and what does it say about the strength of the U.S. economy?” co-host Jeff Bennett asked.
“The problem that we've been dealing with for a while now is that the job market has cooled, but it started off at levels that were probably overheated. So what we need is to get it to stabilize at a steady-state, full-employment kind of level, and [are] “Here are some warning signs: As the job market continues to cool, more months of below-expected results like this one, or downward revisions to already disappointing expectations over the past two months, may make us more nervous and more likely to pay close attention to what's happening with the state of the economy.”
Goolsby added: “My expectation is that multiple rate cuts over the next few meetings would be appropriate, and looking out a year, the only time we would tighten this much as a central bank would be if we were concerned that the economy was overheating, which is not the same thing as overheating. It is, in fact, overheating.”
Goolsby added, “If you look at the long-term trajectory of the data, it's clear what's happened: inflation has fallen significantly, the job market has cooled, and unless we act quickly to normalize interest rates, we're going to get increasingly more troubled in the real economy.”
Bennett continued, “If you look at the downward revisions to employment, we're seeing an average of about 115,000 jobs added per month over the last three months, which is down quite a bit from last winter. Are you confident that employment won't fall so much that it would tip us into a recession?”
Goolsby responded: “That’s the fear, I wouldn’t say I’m confident in the predictions. [a] “Central bankers should be worried about everything, but the biggest concern is that it won't stabilize at the level we're at now, with job creation slowing and unemployment rising. If everything stops and we're at 4.2% unemployment, 150,000 jobs a month, and it stays that way, that's fine. That's the steady-state, full-employment type rate that people were hoping for. The biggest concern is that it continues to cool and get worse. And that's what we have to be wary of.”
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