Goolsbee Says It’s Critical Fed Keeps Eye on Cooling Job Market

(Bloomberg) -- Federal Reserve Bank of Chicago President Austan Goolsbee said it’s time to pay more attention to the employment side of the central bank’s dual mandate now that inflation is cooling toward the 2% target.

“We want to be careful, as Chair Powell said, about the employment side of the mandate, too,” Goolsbee said Friday in an interview on CNBC. “We’re not just fighting inflation now, inflation’s on a path to 2%.”

Goolsbee spoke on the sidelines of the Fed’s closely watched annual policy conference in Jackson Hole, Wyoming. Fed Chair Jerome Powell said earlier Friday that the time has come for the central bank to cut interest rates, cementing the likelihood that policymakers lower rates at their next meeting in September.

Goolsbee said later on Bloomberg TV that quarterly projections released by the Fed over the last year have been a good predictor of the economy.

“The SEPs over the last year have made pretty clear that almost everyone on the committee thinks that conditions will show inflation coming down, the unemployment rate going up gradually and settling in, and that there would be multiple cuts over calendar ‘24 and calendar ‘25,” Goolsbee said, referring to the Summary of Economic Projections.

“That feels like what the path is from conditions so far, to me.”

In the last one, released in June, the median estimate of 19 policymakers saw one quarter percentage-point rate cut this year and four more next year, and the unemployment rate peaking at 4.2% in 2025. The labor market has weakened more than anticipated over the past few months, with the jobless rate rising to 4.3% in July, and markets now forecast about 100 basis points in cuts this year.

The Chicago Fed chief declined to say whether he would favor cutting interest rates at the Fed’s next meeting in September, but he reiterated there isn’t a need to tighten in an economy that’s not overheating.

Goolsbee said nearly all measures of the labor market are cooling, and it’s uncertain whether it’s heading toward a more normal level or weakening beyond that.

“Taking the job market in totality, that’s a critical thing for everybody to do,” Goolsbee said.

Goolsbee voted as an alternate member at the July Federal Open Market Committee meeting following the retirement of Cleveland Fed President Loretta Mester. He won’t vote regularly again until next year.

To follow live coverage from Jackson Hole, click here.

(Updates with Goolsbee interview on Bloomberg TV.)