Former US Treasury Secretary Larry Summers says September’s better-than-expected jobs report shows the Federal Reserve’s half-point rate cut was “a mistake.”
Following the Labor Department’s report that employers added 254,000 jobs in September – well above the 140,000 gain that was predicted by LSEG economists – and the unemployment rate declined slightly from a month ago to 4.1%, Summers took to social media to weigh in on the central bank’s actions.
“Today’s employment report confirms suspicions that we are in a high neutral rate environment where responsible monetary policy requires caution in rate cutting,” the famed economist wrote. “With the benefit of hindsight, the 50 basis point cut in September was a mistake, though not one of great consequence.”
“With this data, ‘no landing’ as well as ‘hard landing’ is a risk the @federalreserve has to reckon with,” he continued. “Nominal wage growth remains well above pre-COVID levels and it does not appear to be decelerating.”
Analysts at The Kobeissi Letter noted that the latest jobs report beat expectations for the first time since May, and posed the question of whether the central bank’s 50-basis point cut was too aggressive.
According to the outlet, markets saw nearly a 50% chance of a 50-basis point cut next month ahead of the latest jobs report, but after the jobs report, the odds of a 25-basis point interest cut in November surged to 93%.
Labor attorney Eric Beane, a partner at Foundation Law Group, told FOX Business that he disagrees that the 50-point cut was a mistake, because the reason for the higher cut was to deal with the slowing in the labor market and an increase in unemployment filings.
“The hope is that, now that inflation is under control, we want to deal with the other side of the Fed mandate and make sure that we’re not tanking employment,” Beane said,” adding, “I think further cuts – probably more measured than a half-point – are what’s going to be necessary to prevent there being a significant decline in employment moving forward.”