Will Fed remain hawkish despite employment slowdown?

The US employment has lost a significant amount of momentum. But some economists still believe that the Fed is expected to stick to its plan despite signs of a weakening.

Fed Chairman Powell, in his speech at Jackson Hole, has put the markets on notice that monetary policy will continue to step on the brakes. It is therefore unlikely that the central bank will use this moderate slowdown of employment growth as an opportunity to raise key rates by only 50 bps in September.

Job growth is, however, still robust despite pace has slowed. Even though the pace of job growth has slowed somewhat, at over 300 thousand it remains strong for this phase of the business cycle, given that one should keep in mind that job growth of around 75 thousand per month is enough to supply the growing working-age population with jobs. Economists’ expectations are still suggesting previous forecast of a 75 bps rate hike in FOMC’s September meeting.