White House Pushes Powell as Jobs Data Forces Fed's Hand

The market's perception of the Federal Reserve's policy direction has begun to shift, as recent economic data suggests the central bank may be compelled to act more aggressively in response to weakening labor market conditions. The latest jobs report, released on Friday, showed a significant shortfall in job creation in August, with the U.S. economy adding just 22,000 positions, far below the 75,000 expected by economists. The unemployment rate also rose to 4.3%, in line with forecasts, but marking a noticeable uptick from the previous month’s 4.2% [1]. These figures have reinforced expectations that the Fed will cut interest rates at its policy meeting in late September [2].

The data has intensified criticism of Federal Reserve Chair Jerome Powell from key figures in the Trump administration. U.S. Labor Secretary Lori Chavez-DeRemer reiterated calls for an immediate rate cut, stating that Powell has not fulfilled his responsibilities in maintaining employment growth and supporting economic momentum. “Jerome Powell needs to do his job and cut those interest rates now,” she said in an interview with Yahoo Finance [2]. President Donald Trump also voiced frustration with the central bank’s timeline, tweeting that Powell should have acted sooner. “Jerome ‘Too Late’ Powell should have lowered rates long ago,” he wrote on Truth Social [2].

Treasury Secretary Scott Bessent added to the pressure, arguing in a Wall Street Journal op-ed that the Fed’s expanded policy toolkit post-2008 has undermined its ability to effectively manage economic conditions. He emphasized that the central bank must recommit to its core mandate of fostering maximum employment, price stability, and moderate long-term interest rates. “The Fed must reestablish its credibility as an independent institution focused solely on its statutory mandate,” Bessent wrote [1]. His comments reflect broader concerns about the Fed’s growing reliance on unconventional monetary tools and its diminished public trust.

The weak labor market data also highlights a growing debate over the balance between curbing inflation and sustaining employment growth. While headline inflation has eased to approximately 2.7%, core inflation remains near 3%, raising concerns that the Fed’s tight monetary policy could push the economy into an unintended contraction. Employco USA President Rob Wilson noted that the current rate environment is slowing hiring momentum, adding that “the jobs numbers are weak enough to justify a reconsideration of policy.” He also warned that maintaining high rates for too long could shift the economy from a controlled slowdown to an excessive contraction [1].

Market participants and analysts are now closely watching how the Fed frames its next steps. UBS Global Wealth Management’s Leslie Falconio stated that the decision for a rate cut is now a near certainty, but the debate centers on whether the cut will be seen as dovish or hawkish depending on how the Fed discusses future policy [2]. EY chief economist Greg Daco similarly noted that while a small cut this month is likely, the broader trajectory of rate reductions remains uncertain, particularly as the Fed faces two more meetings in 2025 and 2026.

The administration has made it clear that further delays in rate cuts could be seen as detrimental to public confidence and economic stability. “If he doesn’t cut rates, the American people will continue to suffer,” Secretary of Labor Lori Chavez-DeRemer said, highlighting the urgency of making borrowing cheaper to support business investment and hiring [2]. With market psychology shifting in favor of easing, the question now is not whether the Fed will cut rates, but how far and how fast it will go to restore balance in the economy.

Source:

[1] Fed's Jerome Powell gets the blame for a weak economy ... (https://www.foxbusiness.com/media/trump-cabinet-members-target-jerome-powell-weak-economy-august-jobs-numbers)

[2] Jobs slowdown seals Fed rate cut as White House criticizes ... (https://finance.yahoo.com/news/jobs-slowdown-seals-fed-rate-cut-as-white-house-criticizes-powell-for-not-acting-sooner-150805909.html)