Bowman: the Fed cut rates, but the labor market is unstable
Michelle W. Bowman, a member of the Federal Reserve Board of Governors, spoke on September 23 at the Kentucky Bankers Association conference in Asheville and backed the FOMC decision to cut the rate by 25 basis points.
She calls it a logical step amid slowing growth and a softer job market. In her remarks, Bowman spelled out her motivation:
I am concerned that the labor market could enter an unstable phase, and there is a risk that a shock could push it into a sudden and significant deterioration.
She said she had proposed starting cuts back in July, but that idea didn’t advance. Inflation excluding tariff effects is already close to the target (2% PCE), which gives the Fed space to maneuver.
If there are no major surprises, Bowman expects the policy rate to gradually move toward a neutral level. Her advice: rely less on the rear‑view mirror and look ahead so policy doesn’t lag the cycle.
In Bowman’s view, in the first half of 2025 consumer spending turned more cautious, residential and commercial construction investment fell, and federal purchases also declined. The only area holding up is high‑tech investment, primarily AI‑related projects and data centers, that tend to be less sensitive to borrowing costs. In housing, new construction and sales are down, inventory is up, and price pressure is building.
The jobs picture looks even more vulnerable: unemployment rose to 4.3% in August, and since April the economy has added about 25,000 jobs per month, which isn’t much. Wage growth has slowed to a pace consistent with 2% inflation. More people have been searching for work for over three months.
Looking ahead, Bowman says the Fed should stay flexible and explain its intended path early, including leaving room for additional cuts to support demand.
It is important to note that monetary policy is not on a preset course. It’s more complicated than that,she said.
On supervision, the priorities are practical: streamline and speed up approvals for bank M&A, reassess capital requirements across bank types, and step up efforts against fraud in payments and check processing.
