In recent speeches, Fed officials Thomas Barkin and Austan Goolsbee highlighted the challenges and uncertainties facing the U.S. economy and offered their views on the current economic landscape.

Richmond Fed President Thomas Barkin offered a nuanced view of the labor market, highlighting a significant shift in hiring practices. “What I’m hearing from people on the ground in the labor market is that people are cutting back on hiring but not cutting jobs,” Barkin said. He described the current environment as a “no hiring, no layoffs” situation, with job growth slowing but continuing positively.

Barkin noted that there is a greater labor supply than was anticipated a year or two ago, and that could lead to an increase in the unemployment rate.

Barkin warned that while job growth has “stagnated,” the risk of it disappearing altogether is a more significant concern. He added that financial markets are closely monitoring both the central outlook and potential knock-on risks, and that stock markets are not reflecting a sense of an imminent crisis.

Barkin also weighed in on the Fed’s decision-making process, particularly around interest rate adjustments. He noted that at the last meeting in July, cutting interest rates required either clear evidence that the labor market was on the brink of a cliff or a firm belief that inflation was under control.

Chicago Fed President Austan Goolsbee echoed Barkin’s cautious tone, saying the Fed is monitoring market conditions and not letting them dictate policy. Goolsbee noted that the key question is whether the labor market will hold steady or continue to weaken. He said it’s important to look beyond employment figures and short-term data to assess the broader economic outlook.

Goolsbee also said the U.S. economy is gradually returning to more normal conditions, but warned that the Fed needs to remain vigilant. “If we’re too tight for too long, we need to watch the real economy,” Goolsbee said, adding that the Fed needs to strike a delicate balance as it moves forward on its policy path.

Barkin suggested that the country could enter a period of prolonged labor shortages, which could have significant implications for future economic growth and policy decisions.

*This is not investment advice.