Key points:
- The Federal Reserve’s Federal Open Market Committee (FOMC) voted to cut the federal funds target by 25 basis points for the second meeting in a row, to a range between 3.75% and 4.0%.
- Indeed’s Job Postings Index has declined by 3.5% since the last federal government payroll employment report, supporting data showing an overall softening of the labor market.
The decision to cut key interest rates for the second straight meeting indicates that FOMC participants continue to assess that economic risks to the labor market exceed short-term inflation risks. But there haven’t been many instances when the Federal Reserve has voted on monetary policy during a government shutdown, and even fewer when these decisions were made without a recent jobs report or other key federal data to help guide their decision-making. That alone made this FOMC meeting especially unique. Add to that the uncertainty of an at-best stagnant labor market and continued upward pressure on inflation, and you end up with a policymaking environment that provides less-than-ideal clarity.
While the Federal Reserve had to make decisions without the benefit of federal data, some private sector data, including from Indeed, can provide insight into current labor market conditions. In the two months from August 12 (the last date for which reliable data from the Bureau of Labor Statistics is available) through October 12, the Indeed Job Postings Index declined by 3.5 percent, a notable acceleration from the 0.09 percent decline observed over the prior two months.
Going forward, the Fed will have to continue to balance its dual mandate of stable prices and maximum employment in the midst of both a softening labor market and annual inflation that remains stubbornly above its 2 percent target. It is uncertain if interest rates will be cut again in the near term, with much riding on whether the weakness of the labor market or higher inflation rates dominate decision-making in the coming months.
