![Many argue the Fed missed the boat last week after failing to cut rates two days before the jobs report triggered a recession indicator.](https://san.com/wp-content/uploads/2024/08/Simone-2-Fed-cuts-data_GETTY_CLEAN.jpg?w=1920)
Simone Del Rosario: I know you have been warning about these underlying symptoms of recession for some time. The Fed chose not to cut in July and then two days later had this jobs report that wrecked the markets for a moment. Where are you? Are they okay to wait until September to cut? Do you want to see something from them in the meantime?
Danielle DiMartino Booth: It would, at this point, would be akin to yelling fire in a crowded theater if they were to come in with an emergency rate cut. Those are usually reserved for end of the world type of moments, financial pandemics, financial crises, credit events. So I think at this point it would do more harm than good. I was strongly of the mind that they should have cut rates at the July meeting. At the podium when he was pressed, Chair Powell did acknowledge that there was a discussion about whether or not to cut rates in July. So you know that even though the decision was unanimous, there were no dissents, that there were some who believed that they should have started in July. There’s a company called Macro Edge and they do a very transparent job of tracking job cut announcements. We’ve had an average of 100,000, more than 100,000 job cuts announced over the last four or five months here in a time of the year that is typically benign. Usually you see your worst month of the year be January. That’s when the CEO and the CFO come in and clean house. But April was worse and it’s been just awful ever since then. For heaven’s sake, we’re seven days into the month of August and we’ve already seen 40,000 job cuts announced. We’re talking about Jay Powell here, he founded the industrials group when he was at the Carlisle. He speaks to lot of CEOs. He knows that they’re in the process of reducing their head count. So just in terms of data on the ground, anec-data, it’s all around him and it’s been all around him. This is nothing new. Companies aggressively laying off. Again, it’s been occurring for most of 2024, and yet he’s been ignoring it. So I really do think that he should have gone on July 31. The reason that I think that we’ve seen in the Wall Street Journal mention 50 basis points is because that’s now become a base case for September 18, or we wouldn’t have read it in the Wall Street Journal.
Simone Del Rosario: Well, we are going to get another month of jobs data before the Fed meets again. You’re talking about this data you’re looking at through macro edge. What sort of labor picture do you think it’s going to paint when we look up the first Friday of September to see what happened in August?
Danielle DiMartino Booth: I mean, anything is possible with this Bureau of Labor Statistics. I’m done guessing what they’re going to do and what they’re going to report. When the data is eventually revised by law, we see where it really, really is.
For me at least, because there is this systematic downward revision of the data, I just feel like it’s a politicized institution at this point. And I don’t say that lightly, and I’m certainly not trying to be insulting to anybody inside the organization, but you typically see the unemployment rate continue to increase after it’s stopped rising by a tenth of a percentage point. It’s what you’ve seen in many, many recessions looking back, initially there’s a very gradual rise in the unemployment rate and then it really starts to take off. And we are seeing companies being much more aggressive and large with their layoff announcements and it is actually manifesting in the jobless claims data as well.
Simone Del Rosario: Is it politicized or are they just not as accurate at this point? Is the survey outdated? Is it that you firmly believe that there are underlying political reasons why the picture is rosier when they first paint it than it turns out to be later?
Danielle DiMartino Booth: Again, we are having this discussion in August 2024, and we’ve been seeing downward revisions since January 2023. If, at this point, there has not been an internal recognition that the model is broken and it’s been addressed, then it’s what we call willful blindness.
So at some point you have to recognize that something is broken and address it, not just ignore it, unless you’re ignoring it willfully. And again, I’m not trying to be insulting of the institution, but we’ve just seen a headline in a $25 trillion economy that funding for the household survey is going to be cut. That’s the most ridiculous thing I’ve ever heard in my life. In a world in which we have big data, artificial intelligence, ways to streamline operations, make certain practices and methodologies more efficient, that we can’t better track the U.S. labor force, it just seems nonsensical to me.