"Powell risks the Fed's inflation-fighting credibility if the weakness in employment is due more to AI and curbs in immigration than weak demand,"
"In considering the extent and timing of additional adjustments... the Committee will carefully assess incoming data, the evolving outlook and the balance of risks."
"We are well positioned to see how the economy evolves"
"be a bit skeptical"
Federal Reserve Chair Jerome Powell warned that the U.S. labor market may be significantly weaker than official data indicate. KPMG chief economist Diane Swonk argues the Fed may be drawing the wrong conclusion by treating slower hiring as weak demand. Swonk says structural factors—AI adoption and sharp declines in immigration—could be driving employment weakness, and lowering interest rates would not address those causes and could exacerbate inflation. Swonk notes the recent FOMC meeting was contentious, with a quarter-point rate cut and three dissents in opposite directions. Fed language signaled a potential pause and Powell urged skepticism about data distorted by the government shutdown.
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