Job Gains Plummet, Economist Warns Fed is “Late again” in Addressing Economic Slowdown
WASHINGTON – A sharp slowdown in job growth coupled with persistent inflation is raising concerns that the Federal Reserve miscalculated the strength of the economy and is once again behind the curve, according to leading economists. The latest jobs report revealed a significant deceleration in hiring, fueling fears of a potential recession despite the FedS efforts to engineer a “soft landing.”
The slowdown comes as the Fed prepares to potentially begin easing monetary policy. Though, experts caution that rate cuts may not be the economic panacea many hope for, and could even exacerbate existing problems. The debate centers on whether the Fed’s actions are appropriately timed and whether they will effectively address the underlying economic challenges.
“The Fed got it wrong, and is late again,” JPMorgan Asset Management chief global strategist David Kelly told CNBC on Friday. “The whole history of the 21st century is rate cuts don’t stimulate growth. They didn’t any in any way after the Great Financial Crisis. So don’t look to the Fed to bail out the economy.”
Adding to the concern, Moody’s Analytics chief economist Mark Zandi previously warned the central bank will have a “hard time coming to the rescue” with a steep easing cycle given that inflation remains stubbornly high. Lower rates could also trigger fears of an impending recession, as the market interprets cuts as a signal of economic weakness.
Kelly further explained that rate cuts could negatively impact retirees’ income and discourage business investment,as companies may choose to delay borrowing in anticipation of even lower rates. He also highlighted the detrimental affect of uncertainty,stating,”the biggest tax the government levies is an uncertainty tax.” he noted that businesses are currently “waiting to see,” a situation he described as risky, adding, “the three most deadly words in economics are ‘wait and see.’ But when everybody decides to wait and see, what you see is not good.”
This uncertainty is compounded by existing economic headwinds, including former President Trump’s proposed tariffs and stricter immigration policies, which could further dampen economic activity. The confluence of these factors paints a concerning picture for the U.S. economy, raising questions about the Fed’s ability to navigate the current challenges and avoid a recession.
