Federal Reserve officials: Employment slowdown does not change rate path, difficult to adjust rate cut expectations.

The unexpectedly weak US employment report for July has raised further concerns among Federal Reserve officials about the economic outlook. Atlanta Fed President Bostic said on Friday that the latest employment data is worrisome, suggesting that the US economy may be weakening more broadly. He stated in an interview that this employment report is "significant" and noted that the revision of previous data was "quite substantial." According to the latest data released by the US Department of Labor, nonfarm payrolls in July increased by only 73,000, well below market expectations of 110,000. The June employment data was also revised significantly downward, from an initial estimate of over 200,000 to just 14,000. Nevertheless, Bostic stated that the labor market is still "good in many respects" and even faced with this data, he would not change the rate decision of the Federal Open Market Committee (FOMC) this week. He pointed out that these employment data may indicate that risks in the economy are "balancing out," but he emphasized that current inflation is still far from the Fed's 2% target, whereas the deviations in the labor market are smaller. Bostic was cautious about the anticipated additional rate cuts in 2025, saying that he is "not ready" to increase rate cut forecasts. He also mentioned that in the current complex economic environment, businesses may need up to 12 months to adjust their pricing strategies, stating, "I think we are in a very difficult environment right now." Manufacturing data further exacerbated the signals of economic weakness. Data released by the Institute for Supply Management on the same day showed that the Manufacturing Purchasing Managers' Index for July dropped from 49.0 in June to 48.0, marking the fifth consecutive month below the breakeven line, indicating that the manufacturing sector continues to contract. Cleveland Fed President Mester also stated in a Bloomberg interview that despite the disappointing employment report, the labor market overall is still "healthy." She believes that the slowdown in nonfarm employment growth to some extent reflects the impact of declining immigration numbers in the US in recent years. Mester further stated that the unemployment rate, as "one of the most reliable indicators we have," is still within the normal range of the past year, so it does not pose an alarm. She also supported the Fed's decision to keep rates unchanged this week and noted that current inflation levels are still significantly higher than the Fed's 2% target. "This is a very complex period," Mester admitted, "and it is not surprising that there are disagreements among policymakers."