Dive Brief:
- The U.S. economy has been performing reasonably well, but trade tensions and concerns about global growth are weighing on the outlook, Federal Reserve Board Chairman Jerome Powell testified before the House Financial Services Committee today.
- “Apparent progress on trade [has] turned to greater uncertainty,” Powell said in his written testimony. “Growth indicators from around the world have disappointed on net, raising concerns that weakness in the global economy will continue to affect the U.S. economy.”
- Powell said the economy grew at 3.1% in the first quarter of this year and jobs are growing at an average of 172,000 a month. That growth is lower than last year, but high enough to shrink the unemployment rate, which stands at about 3.7%, close to its lowest level in 50 years.
Dive Insight:
The labor picture is mixed, because jobs aren’t well distributed across the country. Low- and moderate-income families continue to find upward mobility hard, and African Americans and Hispanics, as well as people living in rural areas, continue to face higher unemployment and a shortage of well-paying jobs. Overall, compared to the labor picture in other developed countries, the U.S. is seeing higher unemployment among people in their prime working years.
Inflation continues to be weak, about 1.5%, half a percentage point below the Fed’s target rate of 2%.
Powell said the Federal Reserve’s Open Market Committee has kept its short-term rate between 2.25% and 2.50%, what he called part of the agency’s "patient" strategy. Since the Fed’s meeting in May, however, “crosscurrents,” including trade tensions and the global slowdown, have reemerged, putting the agency on alert to the potential to change its monetary stance going forward.
“In our June meeting statement, we indicated that, in light of increased uncertainties about the economic outlook and muted inflation pressures, we ... would act as appropriate to maintain the expansion.”
That economic expansion is now in its 11th year, making it the longest on record.
