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  • joshfeldman

Was that necessary?

The Federal Reserve Bank cut interest rates 1/4 percent last week. With unemployment low and economic growth at about 2 percent, some argue that it was not needed. There are some that believe that the Fed bowed to political pressures.

I cannot speak to the pressures because I don’t have any contact with the members of the Fed Board. What I do know is that the economy has decelerated appreciably from the first quarter to the second. The Tariff wars are destabilizing which adds to the economic headwinds. Inflation remains around 2 percent. Foreign economies are stagnant and their central banks have been cutting rates. Without a rate cut the dollar would strengthen and create more weakness in exports.

I also think that the headline unemployment statistic is an anachronistic measure in a world of increasing self employment. Working 5 hours a week or 50 counts the same to the Department of Labor. They are going to need new tools to gage how well the labor market is functioning. If there are fewer manufacturing jobs but more fast food is that a cause for celebration? The labor market is tightening for french friers and burrito assemblers.

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