After a disappointing employment report, Federal Reserve officials speak out: Will not overreact to a single monthly report

Following the lackluster employment report that surprised Wall Street, Federal Reserve officials took the opportunity to hint during public statements that the Fed would not take action based on a single report, but would respond to pressures such as rising unemployment.

On Friday, August 2, 2025, Chicago Fed President Austan Goolsbee, who will have voting rights at the 2025 Federal Open Market Committee (FOMC) meeting, emphasized that the Fed would not overreact to any single report, as policymakers will have plenty of data before the next meeting in September. He stated:

"We will never overreact to any one month of data." However, "if the unemployment rate is expected to exceed the neutral rate, that puts additional pressure on the Fed, as mandated by law, to consider and address."

Goolsbee stated that the Fed's job is to identify the "main thread" running through the data and take action in a "steady" manner. However, he pointed out that if restrictive rates persist for too long, policymakers must consider the mission of full employment.

Goolsbee's remarks came shortly after the US Department of Labor released the US non-farm employment report this Friday, showing a significant slowdown in job growth over the past month, with the unemployment rate hitting a nearly three-year high, intensifying concerns about the economy entering a recession.

The report revealed that non-farm payrolls increased by 114,000 in July, hitting a monthly low since December 2020, falling short of analysts' expectations by 61,000, and revising down June's additions by 27,000 to 179,000. The July unemployment rate did not remain stable as expected from June, instead rising for the fourth consecutive month to 4.3%, reaching a new high since October 2021, rising by 0.6% from the low point earlier this year, surpassing the 0.5% threshold of the Sam rule based on unemployment rate predictions for a recession, indicating that the US is beginning to enter a recession.

However, some analysts believe that this report does not prove a recession but rather serves as an early warning signal of further economic weakness. Moreover, the unemployment rate during the July reporting period may have been distorted by the impact of Hurricane Beryl. Due to the hurricane, temporary layoffs in July increased by 249,000.

On Friday, Goolsbee made his first public statement after the FOMC meeting at the end of July. The FOMC meeting concluded on Wednesday with the announcement of maintaining interest rates unchanged, but the policy statement made a significant shift, no longer stating "still highly concerned about inflation risks," but instead focusing on the risks faced by the dual mandate of employment and inflation, seen as paving the way for future rate cuts.

On the same day after the meeting, Federal Reserve Chairman Powell stated in a press conference that a rate cut might be an option at the September FOMC meeting if the overall data and evolution of risk balance give the Fed more confidence in declining inflation and if the labor market remains strong The earliest possible rate cut in September. He revealed that the general view of the Federal Reserve's Federal Open Market Committee (FOMC) is that the time for a rate cut is approaching, but it has not yet fully reached that point.

This Friday, Goolsbee said that the economic situation will determine the timing and extent of the rate cut. And "when (the economy) needs a rate cut, it often won't be a one-time cut."