What the strong jobs report means for the Fed’s plan to lower interest rates

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• Amna Nawaz:

  Today's job report shows the labor market was running hot again last month. And it's been resilient for months, despite recession predictions last year. The unemployment rate has been below 4 percent for two consecutive years, a record we haven't seen in over 50 years.

  At the same time, the Federal Reserve indicated this week it's too soon to start lowering interest rates.

  Joining us now is Austan Goolsbee, the president of the Federal Reserve Bank of Chicago.

  Welcome back to the "NewsHour." Thanks for joining us.

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

• Amna Nawaz:

  So, 355,000 jobs added last month, unemployment below 4 percent, what do all these numbers tell you about where the economy is right now?

• Austan Goolsbee:

  It still feels strong.

  I mean, the headline number was almost breathtaking. If you peel back the onion a little bit, it's not as strong as that headline number advertises, because a lot of the increase in jobs were part-time jobs. So, if you look at the — let's call it the total hours worked, that's not up as much as just the number of jobs was up.

  But it's still very strong, and it's in the context that inflation has been coming in better than expected as well. So, both sides of that have been quite positive.

• Amna Nawaz:

  It's worth noting the projections for today's jobs numbers were off quite a bit again, and predictions about a possible recession last year were also off. What is it about this economy right now that makes forecasting so hard?

• Austan Goolsbee:

  It's always hard. It's always hard to forecast, and any one month's number has a kind of a plus- or minus-110,000 to it. So this was a miss to the downside.

  We came in with a very strong number, almost double what was expected. But when you come out of such a weird moment as what COVID was, we probably shouldn't be surprised that our models aren't that great at figuring out what's going to happen.

• Amna Nawaz:

  At the same time, we know mortgage rates, car loans are still very high. We know the Fed Chair Jerome Powell indicated that rate cuts won't happen in early spring, as many had hoped that they might.

  Does today's report line up with that, in your view? You still think it's too soon to lower rates?

• Austan Goolsbee:

  As a member of the Federal Open Market Committee, I don't like tying our hands ahead of time, when we got weeks and months of data to come in. We ought to base those decisions on how the actual data come through.

  I think more and more progress like what we have seen on inflation and on jobs is what we need to see to feel comfort that we're on target. As you know, the law, the Federal Reserve Act, gives the Fed a dual mandate job to maximize employment and stabilize prices. And that's what the Fed has to pay attention to are those two things.

  And so far, it's been going pretty well. The year 2023 by that dual mandate goal went quite well. And we just want to make sure that we're on path to see that.

• Amna Nawaz:

  Inflation has been coming down. As you mentioned, the jobs numbers are good, but there are some things that impact people's everyday lives that remain really tough, grocery prices in particular.

  We know they jumped 25 percent over the last four years, and they remain high. For millions of households, that is it. That's a critical everyday financial pinch, right? So for the people who see headlines that say the economy is strong, the economy is coming back and don't feel it every day, what can you say to them about when that will change?

• Austan Goolsbee:

  Yes, look, it's a perfectly fair point.

  And we — look, we went through a period where inflation was way, way too high, far higher than where the Fed's target is or where we want it to be. And price levels are still elevated. The question is, is that the thing that drives vibes, or do vibes lag actual conditions? I don't totally know the answer to that.

  I know that the Fed job, like I say, by law, is maximize employment and get the inflation rate down to 2 percent. And that's what the Fed is going to be doing. How that falls out in the vibes and the price level is a — that's a second matter, but the Fed can't really adjust that without using its one instrument.

  It just has the one instrument of raise rates or lower rates. If you're trying to get the price level back to what it was some years ago, you would really have to just crank down the economy to do that. So that's not in our card deck.

• Amna Nawaz:

  I got to ask you too. All of this is unfolding, of course, in an election year. And you know well the intersection of presidential politics and economic issues from your time in the administration.

  Former President Trump is again accusing the Fed chair, Jerome Powell, of acting politically. His latest statement says this. He says: "I think he's going to do something," speaking of Mr. Powell, "to probably help the Democrats, I think, if he lowers interest rates. It looks to me like he's trying to lower interest rates for the sake of maybe getting people elected."

  What do you say to people who share that concern or seeing any of the Fed's actions through a political lens?

• Austan Goolsbee:

  Well, they shouldn't.

  And the Fed is totally transparent. They put out the minutes and later will put out the full transcript of the meetings. And just know that the Federal Open Market Committee has by law dual mandate of what they look at. It bases the decisions on actual economic conditions and data. That's what will drive what the Fed can do.

• Amna Nawaz:

  When you look at the big picture now, is there any other lever that you think Congress or the president should be using at this moment, in your view, to keep the economy moving in the right direction?

• Austan Goolsbee:

  Well, as you know, the monetary authorities, our job is a very narrow lane of just monetary policy. We don't weigh in on fiscal policy or congressional opinion. They can do whatever they feel is appropriate.

  And our conditions — I say it's sort of the Midwest motto, we take the conditions as they come. There is no bad weather. There is only bad clothing. And we will deal with whatever the conditions are and forward the mandate.

• Amna Nawaz:

  That is Austan Goolsbee, president of the Federal Reserve Bank of Chicago.

  Mr. Gillespie, thank you so much for joining us. Pleasure to speak with you.

• Austan Goolsbee:

  My pleasure. Thank you.