Atlanta Fed president: The downward revisions to jobs report are telling

Key Concepts:

• Employment market slowdown
• Inflation risk vs. Employment risk
• Core PCE (Personal Consumption Expenditures)
• Dual Mandate (Price Stability and Maximum Employment)
• Monetary Policy

Employment Market Slowdown:

The speaker emphasizes the significance of the current employment numbers, particularly the downward revisions in the previous two months. These revisions signal a clear and significant slowdown in the employment market, even from a previously strong base. The key question is whether this is a temporary dip or a sustained trend.

Inflation vs. Employment Risks (Pre-Report):

Prior to the release of the current data, the speaker believed that the risks to inflation were greater than the risks to employment. The core PCE inflation rate was at 2.8% and not trending towards the 2% target. Contacts indicated rising price pressures, while labor markets appeared stable with unemployment at 4.1%, solid wage growth, and solid employment growth.

Impact of New Data and Revisions:

The current numbers and revisions suggest a broader weakening of the economy and labor market than previously observed, at least within the speaker's district (Sixth District). This shift implies that the risks to the employment side of the dual mandate are becoming more balanced with the risks to inflation.

Policy Implications:

The speaker acknowledges that this new information will significantly influence their assessment of the appropriate path for monetary policy. The speaker will have to re-evaluate the appropriate path for policy given the new data.

Notable Quotes:

• "The numbers today were significant and I agree with you that the revisions downward in the previous two months were perhaps the bigger story."
• "...the risks to the employment side of the mandate are maybe coming more into balance with those in inflation."

Conclusion:

The speaker is acknowledging a potential shift in the economic landscape, where the labor market is showing signs of weakness. This development necessitates a reassessment of the risks to both inflation and employment, and consequently, a re-evaluation of the appropriate monetary policy stance. The speaker is moving from a position where inflation was the primary concern to a more balanced view considering both inflation and employment risks.