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    As Federal Reserve Readies Interest Rate Cut, Risks to Job Market Still Loom

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    The Federal Reserve is poised to lower interest rates this week. Recent jobs data have been a reminder that a soft landing is not yet assured.An object in motion stays in motion. Is a labor market trend that’s well underway any different?That’s the question looming for officials at the Federal Reserve as they try to pull off a feat that has never really been accomplished before: gently cooling an economy that was experiencing rip-roaring inflation without tanking the job market in the process.So far, the Fed’s attempt at a soft landing has worked out better than just about anyone, including central bankers themselves, expected. Inflation has cooled significantly, with the Consumer Price Index down to 2.5 percent from a peak of 9.1 percent just two years ago. And even with the Fed’s policy interest rate at its highest level in more than two decades, consumer spending has held up and overall growth has continued to chug along.Fed officials are eager to keep it going. That is why all signals suggest that they will lower interest rates at the conclusion of their meeting on Wednesday — and the only real question is whether they will cut them by a typical quarter of a percentage point or by a half percentage point. They are also likely to forecast that they will lower interest rates further before the end of the year, perhaps predicting that they will cut them by a full point from their current 5.33 percent.But even as the Fed turns an important corner on its fight against inflation, real risks remain. And those center on the labor market.Unemployment has been slowly, but steadily, rising. Wage growth has been consistently slowing. Job openings have come down, and hiring rates have come down along with them. And while all of those developments are what the Fed wanted — the point of this exercise was to slow an overheated job market and prevent it from fueling future inflation — central bankers have been clear that they do not want to see it continue.“We do not seek or welcome further cooling in labor market conditions,” Jerome H. Powell, the Fed chair, said in his latest speech.Unemployment and Underemployment RiseThe jobless rate historically jumps during recessions.

    Notes: Unemployment is the share of people actively looking for work; underemployment also includes people who are no longer actively looking and those who work part time but would prefer full-time jobs. Seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York TimesWage Growth Is Cooling SteadilyAfter spiking in 2022, wage gains for rank-and-file workers have been coming down.

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    Year-over-year change in average hourly earnings
    Note: Data is for production and nonsupervisory employees and is not seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York TimesJob Openings Fall, Just as More People Look for ThemAfter years in which jobs were much more plentiful than available workers, that ratio is on the cusp of flipping.

    Data are seasonally adjusted.Source: The Bureau of Labor StatistticsBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Inflation: resurrection

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    Jay Powell faces milestone moment for the US economy

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    Global carbon pricing needed to avert trade friction, says WTO chief

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    Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Global carbon pricing is needed to prevent “difficult and problematic” disputes over environmental measures from disrupting trade, the head of the World Trade Organization has said.Ngozi Okonjo-Iweala told the Financial Times in an interview that the WTO was taking the lead in working for an international carbon pricing system with the IMF, OECD and UN. That effort comes in response to the EU’s carbon border adjustment mechanism, which came into force this year and requires exporters to the trade bloc to pay a levy linked to the EU carbon price for the emissions of certain carbon-intensive products including steel, cement and fertiliser. The measure, which comes into force in 2026, is meant to level the playing field between EU manufacturers, who have to pay for emissions under the bloc’s cap-and-trade system, and exporters in countries with lower or no carbon prices. It is expected to trigger a slew of complaints at the WTO from trading partners.India has already hinted it could bring a WTO case, while other developing countries have said the measure would price their goods out of EU markets.“Developing countries see it, rightly or wrongly, as a protectionist mechanism,” the WTO director-general said. “They have contributed very little to emissions. Africa is 3 per cent of [current] global emissions.” The EU has defended the measure and emphasised that it has sent officials around the world to help countries including China to develop their own carbon markets. In a document outlining political priorities for the next five-year mandate of the European Commission, its president Ursula von der Leyen said the bloc must “step up our green diplomacy and engage more with non-EU countries on external aspects of our policies”.Okonjo-Iweala said the EU was right to try to tackle climate change but its approach could fragment efficient trade routes at the cost of economic growth.“We see [litigation] coming. We think it will be quite difficult and problematic. So we’re trying to avoid that by saying why don’t we develop a global framework that is interoperable? So that we can limit the trade litigation frictions that would come here.”The Nigerian said there were 78 different carbon pricing and taxation mechanisms in the world.The intention of the working group was to find a way to set different carbon prices in different regions. The EU might pay $80 a tonne, and Africa $20. This would require a change to CBAM, which levies the difference between the EU carbon price and that paid by the source of the imports to the bloc.The proposed global system would also need safeguards against carbon arbitrage, where heavy emitters simply move to areas with lower prices, Okonjo-Iweala said.Okonjo-Iweala, who has been nominated for a second term at the WTO by African countries, said she wanted trade to help reduce carbon emissions.  “I’m really personally so excited about it because I think there’s really potential for trade to do more, for trade to be part of the answer. ”When she started in 2021 “trade was seen as part of the problem” because of transport emissions and commodities exported from deforested land. “I really wanted to turn that around.”She said she had encouraged countries signed up to an international procurement agreement to prioritise green purchasing. There are also WTO talks over a global environmental goods agreement that would drop tariffs on many items such as solar panels. However, the US especially has been raising tariffs to foster a domestic industry to compete with China.Okonjo-Iweala said countries should reroute environmentally damaging subsidies towards sustainable industry. There are $1.2tn of annual fossil fuel subsidies, $600bn of trade-distorting agricultural subsidies, $300bn of water subsidies and $22bn of harmful fisheries subsidies, she said.Her term expires next year, but she is expected to make an announcement on Monday about whether she will run for a second term.Okonjo-Iweala could be confirmed after a month if no rival emerges, which would prevent a re-elected Donald Trump from blocking her, as he did in 2020. He left office in January 2021, allowing her to take the job.Additional reporting by Alice Hancock in BrusselsVideo: The carbon capture question | FT Climate CapitalClimate CapitalWhere climate change meets business, markets and politics. Explore the FT’s coverage here.Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here More