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Job growth has slowed sharply; the question is why

After an avalanche of data last week, there are more signs of a slowing economy.

It’s a complicated mix of supply and demand shocks, but an unsurprising outcome given the significant policy changes this year, including higher tariffs, less immigration, and downsizing the government. Job growth has slowed markedly, but the source of the slowdown is crucial for judging whether it is a sign of cyclical weakness in the labor market and whether the Fed should lower interest rates in response. John Williams, New York Fed President, said on Friday after the employment report noted the large downward revisions, and said it’s important “to understand the direction of what we’re seeing in supply and demand for labor.” Looking across various data, he argued that, “What we’re seeing I would describe over the past year as a gentle gradual cooling of the labor market, but still leaving it in a still solid place.”

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