Delayed jobs report ‘definitely complicates’ rate cut decision, Chicago Fed president says

Amna Nawaz:

Welcome to the "News Hour."

Job growth was better than expected in September, with 119,000 new jobs added. Those were the best job gains since April.

Geoff Bennett:

The unemployment rate rose to 4.4 percent, its highest level in four years, as about half-a-million people reentered the labor force. The official report comes seven weeks late, after the government shutdown, making it the first federal snapshot of the labor market since agencies reopened.

But key economic data is still missing and questions remain about the true strength of the economy. The uncertainty now lands squarely on the Federal Reserve as it prepares to consider another rate cut.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, is one of the officials weighing that decision. I spoke with him earlier today.

Austan Goolsbee, welcome back to the "News Hour."

Austan Goolsbee, President, Federal Reserve Bank of Chicago: Yes, thank you for having me, Geoff.

Geoff Bennett:

And let's start with your reaction to the September jobs report. Looking at the numbers, slightly better than expected, solid hiring, but the unemployment rate creeped up a bit. What's your read on what this report is actually saying about the direction of the economy?

Austan Goolsbee:

Well, better late than never. We're not getting this number until well after when we normally would have gotten it. So a little bit it's a misleading indicator of where things are headed because it's out of date.

But I think mostly the numbers show the job market has remained steady in an unusual low-hiring, low-firing kind of environment. So, normally, if you have low hiring, you have high firing and high layoffs, or the reverse. But here, whether because there's a lot of uncertainty or for other reasons, we're in a moment where the unemployment rate remains fairly low by historical standards, is gradually cooling, but overall pretty steady, I think.

Geoff Bennett:

You mentioned the delay in getting this September jobs report. Of course, during the shutdown, there was a blackout of official government economic data.

How much does that complicate the Fed's ability to accurately assess the economy right now?

Austan Goolsbee:

A lot. It complicates it a lot.

And the same people who are collecting the job numbers also collect inflation numbers. And whereas, on the job side, we at least have some pretty decent indicators even when the official jobs numbers are delayed or not coming out, we have some private sector sources at the state level — the new unemployment claims give us some readings.

The Chicago Fed itself puts out its labor market indicators. On the inflation side, it's even more problematic because there aren't nearly as many private sector sources to tell us about what's happening with inflation. So it definitely complicates the job of a Central Bank if you're not getting the information you need.

Geoff Bennett:

There's been some anxiety in the market this past week over whether the surge in A.I. investment was turning into something of a bubble. Where do you stand on that? Is too much of the economy leaning on that sector?

Austan Goolsbee:

It might be.

Look, it's always hard to figure out if you're in a bubble. It's certainly got very high valuations in the stock market. If you're old enough, you will remember the late '90s and going into 2000, and it does have some things that feel in that nature.

That said, it's been a major determinant powering business investment in the country. Normally, business investment is quite cyclical. Even if you knew it were a bubble, can a Central Bank pop a bubble? Is that appropriate? I don't know. I do think very low interest rates in the face of a bubble threaten to fuel it.

So it's something that I'm monitoring. And the Chicago Fed, we're monitoring quite a lot for financial stability reasons if you could have a popping bubble. That has caused recessions in the recent past in the United States.

Geoff Bennett:

So what's all that mean for the potential for another rate cut in December?

Austan Goolsbee:

I don't like — I never like, as you know, tying our hands before we go into the meeting, when we're still going to get some information, and especially at moments like this where we're trying to figure out, is this a transitional moment?

I do want to hear from my colleagues because they have some interesting world views different from mine. That said, I'm no — looking at rates over the medium run, I still think with stable employment, if we can get back on a path to 2 percent inflation and get past this uptick that we have been seeing, I think rates can go down a fair amount from where they are now.

But I'm a little uneasy front-loading too many rate cuts and just assuming that the inflation we have seen is going to be transitory. That makes me uneasy with too much front-loading.

Geoff Bennett:

And even as the Fed has eased rates over this past year, the pressure from President Trump, as you well know, has not let up. Just yesterday, he went after Fed Chair Jerome Powell again, encouraged the treasury secretary to pressure Powell as well. Take a listen.

President Donald Trump:

Mortgage rates are down, despite the Fed. I mean, Scott, you have got to work on this guy. He's got some real mental problems.

(Laughter)

Donald Trump:

No, there's something wrong with him. It's just ridi — I'd be honest. I'd love to fire his ass. He should be fired.

(Laughter)

Donald Trump:

The guy's grossly incompetent.

Geoff Bennett:

What's this all mean for the Fed's independence and, beyond that, perceptions of the Fed's independence?

Austan Goolsbee:

I have been in the Fed coming on three years. I was a research economist 30 years before that.

Economists are close to unanimous that a Central Bank must be independent of political interference when setting the interest rate. If there isn't independence of the Central Bank, inflation comes roaring back, growth is worse, unemployment is worse, because somebody's got to be taking a broader view, and that Fed independence is crucially important.

So it pains me if we're having public discussions about whether the Fed should be independent. It should be independent.

Now, if the president has a view about where we are in the economy, he, like — there are many people who have views on the economy. And I try to keep track of those of those views and take seriously what the arguments are. At the end of the day, the FOMC, my observation is, everybody takes the job very seriously.

And you can look at the minutes. You can look at the transcripts for yourself. It's not about anything other than the economic outlook and the data. And that's what it should be.

So, outside opinions are important, and everybody has one. But the decisions have got to be made on the data. And that takes place inside the room of the FOMC meeting.

Geoff Bennett:

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, always great to speak with you.

Austan Goolsbee:

Yes, wonderful to see you again.