Senior Fed Official Issues "Recession Warning": Warning Signals for Economy and Employment are Flashing!
Next year, Fed Governor Guersley stated that there is a risk of continued rise in the unemployment rate. The Federal Reserve needs to cut interest rates before the labor market further weakens, otherwise it may act too late and jeopardize the economy
Overnight, retail and initial application data have just dispelled market recession expectations, but a senior official from the Federal Reserve subsequently issued a warning, stating that warning signals for the economy and employment are flashing.
On Friday, 2025 FOMC voter and Chicago Fed President Guersby told National Public Radio (NPR) in the United States that the labor market and some leading economic indicators are flashing warning signals, with the risk of a sustained rise in the unemployment rate.
Historically, if the unemployment rate starts to rise and temporary employment data turns negative, that is a leading indicator. There are multiple leading indicators of economic recession, some of which are issuing warning signals, but there are also counter-trends.
Compared to inflation, Guersby is now more concerned about employment issues. He pointed out that once the labor market starts to have problems, it will deteriorate rapidly.
When problems arise in the labor market, they often do not appear slowly. They tend to rise like a rocket and fall like a feather.
Guersby stated that the rising credit card delinquency rate and increasing small business defaults are worrisome. According to a previous article on Wall Street News, the U.S. credit card delinquency rate has exceeded that of 2019, with over 10% of credit card debt overdue for more than 90 days.
Nevertheless, U.S. consumer resilience may still be stronger than Wall Street's predictions. Overnight data shows that U.S. retail sales in July saw the largest increase in a year and a half, while the number of initial jobless claims was lower than economists' expectations. In addition, Walmart's strong profits have dispelled some recession fears.
Guersby refused to disclose whether he would support a rate cut at the Fed's next meeting in September, but he reiterated that if the economy is not overheating, there is no need to continue tightening policy.
Earlier this week, in an interview with the Associated Press, Guersby stated that the Fed needs to cut rates before the labor market weakens further, otherwise it may act too late and endanger the economy.
On Friday, when asked about the possible rate cut magnitude, Guersby said "all scenarios are always under consideration."
In the past year and a half, inflation has dropped significantly, the unemployment rate has risen slightly, and the labor market is cooling down. We hope it stabilizes at the level of full employment. Some are concerned about whether (inflation) will stop declining