Fed flags concern about sharp slowdown in job creation

WASHINGTON

U.S. Federal Reserve Chair Jerome Powell warned on Oct. 14 that risks to employment had risen in recent months, noting there had been a sharp slowdown of job creation in the world's leading economy.

"While the unemployment rate remained low through August, payroll gains have slowed sharply, likely in part due to a decline in labor force growth due to lower immigration and labor force participation," he told a conference in Philadelphia.

Economic growth appears to be holding up well, he added.

No official jobs data has been published for September due to the ongoing U.S. government shutdown, but private sector figures point to a marked slowdown in hiring last month.

In mid-September, Fed officials moved to cut interest rates for the first time this year, voting overwhelmingly for a quarter-point rate reduction to help support the flagging labor market.

At the September meeting, Fed policymakers penciled in an additional 50 basis points of cuts this year, which suggests additional action at the bank's two remaining rate decisions this year, in October and December.

"In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen," Powell said, noting that longer-term inflation expectations remained aligned with the Fed's target of 2 percent.

"Rising downside risks to employment have shifted our assessment of the balance of risks," he said, adding there was "no risk-free path for policy as we navigate the tension between our employment and inflation goals."

The bank has a dual mandate from Congress to act independently to tackle both inflation and employment.

"Both supply and demand in the labor market have come down so sharply, so quickly," Powell said.