Analysis: Peculiar Divergence in US Economic Data Puts the Federal Reserve in a Policy Quandary


November 24th, the U.S. economy is currently experiencing a puzzling anomaly, causing concern among policymakers tasked with curbing inflation and maintaining the labor market. Labor Department data shows job losses in June and August, with a meager three-month average of about 62,000 new jobs added as of September.However, worker productivity, a key driver of economic output, remains high. The Gross Domestic Product (GDP), which measures the output of all goods and services in the economy, also remains strong. This contradictory situation of economic expansion coexisting with a weak labor market has presented a dilemma for the Federal Reserve policymakers, making it challenging for them to determine whether the economy needs to cool down or be further stimulated.Economists believe it is currently uncertain whether rate cuts can ultimately offset the erosion in hiring due to significant policy changes. Ryan Sweet, Chief U.S. Economist at Oxford Economics, said, "Fortunately, we have not yet seen mass layoffs; otherwise, a lack of job expansion would evolve into an economic recession. The economy can grow without creating a large number of jobs, but the prerequisite is that productivity must continue to grow healthily." A lack of job expansion could quickly evolve into an economic recession.