Federal Reserve Holds Rates at 3.50%-3.75% as July Payrolls Fall 23,000
Updated
Updated · The Center Square · Aug 16
Federal Reserve Holds Rates at 3.50%-3.75% as July Payrolls Fall 23,000
3 articles · Updated · The Center Square · Aug 16
Summary
The Fed kept its policy rate at 3.50%-3.75%, with a 9-3 vote in July, as officials faced weak hiring on one side and still-elevated inflation on the other.
July payrolls fell 23,000, labor-force participation slipped to 61.4%, and job growth averaged just 34,000 a month over the past year, leaving the labor market stagnant rather than collapsing.
Inflation cooled only superficially: July CPI rose 0.1% and headline inflation eased to 3.4%, but falling energy prices did much of the work while core PCE is nowcast at roughly 0.24% for the month.
Consumers are still spending, but barely in real terms—July retail sales fell 0.58%, the saving rate dropped to 2.7% in June from 4.5% in January, and wage growth of 3.2% trails 3.4% inflation.
Business investment remains strong, helped by AI spending, yet productivity has not followed; utilization-adjusted TFP fell 0.42% over the year through Q2, reinforcing the case for no near-term rate cut or hike.
If wages lag behind inflation while the Fed holds rates steady, how long can everyday consumers sustain the broader economy?
Can the multi-trillion-dollar AI investment wave single-handedly keep the economy afloat amidst the sharpest labor supply drop since the Great Depression?
With the labor pool shrinking and AI booming, are we entering an era where machines replace missing workers rather than displacing them?