The combination of tariff-driven inflation and a downturn in hiring has posed a “challenging situation” for the U.S. economy, according to Federal Reserve Chair Jerome Powell.
Delivering an annual address in Jackson Hole, Wyoming, Friday morning, Powell underscored that the economy was engaged in a “curious kind of balance” from a slowdown in both the supply and demand for workers.
“This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment,” Powell warned.
Powell pointed to the July jobs report, which revised employment data from the previous two months. The updated numbers moved the three-month growth average to 35,000, the lowest three-month period since 2010 (other than the pandemic). It was a stark contrast from the growth felt during 2024, when the measure showed an increase of 168,000 jobs per month. The July report’s downsizing also suggested that while some sectors, such as health care and social assistance, gained jobs, the vast majority of the market lost employment.
“This slowdown is much larger than assessed just a month ago, as the earlier figures for May and June were revised down substantially,” Powell continued. “But it does not appear that the slowdown in job growth has opened up a large margin of slack in the labor market—an outcome we want to avoid.
“Indeed, labor force growth has slowed considerably this year with the sharp falloff in immigration, and the labor force participation rate has edged down in recent months,” Powell said.
The Federal Reserve chair also noted that the effects of Trump’s tariffs on consumer prices are “now clearly visible,” and that the country’s central bank expects the price increases to “accumulate over the coming months.”
Powell: “This slowdown is much larger than assessed just a month ago, as the earlier figures for May and June were revised down substantially. But it does not appear that the slowdown in job growth has opened up a large margin of slack in the labor market, an outcome we want to… pic.twitter.com/BOVbTXStdb
— Aaron Rupar (@atrupar) August 22, 2025
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