This Time Is Different for the US Economy
Downside risks to the labor market are becoming more of a concern for Fed policymakers, with some open to a July interest rate cut.
It’s a tough market.
Photographer: Joe Raedle/Getty Images North AmericaIt’s been three years now since people began worrying that high interest rates would push the US economy into recession, so some skepticism is in order whenever a spell of soft economic data draws fresh concerns. A growing body of evidence, however, suggests that this time really is different. The unusual supports that held up the labor market following the pandemic are now largely gone, inviting more typical recessionary risks if the economy weakens from here.
The most concerning recent trend is the uptick in the number of people collecting unemployment benefits, which has accelerated over the past couple of months at the quickest pace since early 2024. This, combined with the softening in underlying inflation, has prompted a rethink from some members of the Federal Reserve’s rate-setting committee on how quickly to resume policy easing to support the labor market.