Fed chair under fire: Economists blame high interest rates for 'weak' jobs report

02 August 2024

Economists are blaming Federal Reserve Chairman Jerome Powell after the July jobs report saw unemployment jump up to 4.3%, from 4.1% in June. The Fed has been praised for the “soft landing” it engineered by raising interest rates and keeping them high, avoiding a recession and performing better overall than any of the G7 countries in the wake of the COVID pandemic, but multiple economists, and economics experts and journalists who write about the economy collectively are saying, the Fed “should have cut.”

Some are adding that the political portion of that equation means that next month when the Fed most likely does cut rates, Donald Trump and his camp will accuse the move of being a political, not economic one. That caution came from, among others, CNBC’s Andrew Ross Sorkin Friday morning after the report dropped.

“Andrew makes the best point ever,” remarked MSNBC’s Stephanie Ruhle on-air while speaking with Sorkin. “Donald Trump and his allies are going to go absolutely – and I speak technical here – ‘binonkers’ when and if the Fed acts, and they most likely will, and he’s going to wring his hands and say it’s ‘politics, politics, politics.'”

Fox News immediately jumped on the unemployment rate increase, predicting likely recession and painting a dire picture. Former Senior Advisor for Communications to the National Economic Council, .Jesse Lee, added some facts to Fox News’ reporting – showing jobs numbers in recent years, 2018 and 2019, were far lower.

The Washington Post’s Heather Long sums up the report: “A really weak July jobs report. The US economy added only 114,000 jobs in July (well below forecasts) Unemployment rate hits 4.3% —> Highest since October 2021 and this triggers the Sahm Rule recession indicator. Wage growth: 3.6% (vs. 3% inflation).”

(While several economists have also mentioned the “Sahm Rule,” that does not mean the U.S. is in a recession, nor that one is inevitable, as CNN reports.)

“The clear message in today’s soft jobs report is the Federal Reserve needs to cut interest rates,” says Mark Zandi, chief economist at Moody’s Analytics. “They should have begun cutting rates months ago. Job growth is decidedly throttling back, unemployment is rising quickly, hours worked per week are low and falling, and temporary help jobs continue to evaporate. Wage growth and inflation are back to the Fed’s target. The question isn’t whether the Fed should cut in September, but by how much.”

Veteran journalist John Harwood, formerly of CNBC, CNN, and The Wall Street Journal, cited Mark Zandi and said, “once again [he] was right as he has been consistently in recent years.”

“Fed should have cut this week behind the curve,” he added, also noting New York Times economist Paul Krugman “was also right.”

Professor of economics and international affairs Tara Sinclair also wrote: “The Fed should have cut this week.”

And Michael Linden, a Senior Policy Fellow at the Washington Center for Equitable Growth, also wrote: “Fed should have cut.”

Watch the video above or at this link.

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