Fed Chair Powell: Labor market is in a 'curious kind of balance'

Labor Market Conditions - The unemployment rate is at a historically low level of 42% and has been broadly stable [1] - Labor supply has softened in line with demand, lowering the break-even rate of job creation [1] - Labor force growth has slowed considerably due to a sharp falloff in immigration and a decrease in the labor force participation rate, suggesting rising downside risks to employment [2] Economic Growth and Inflation - GDP growth has slowed to a pace of 12%-2% in the first half of the year, roughly half the 25% pace in 2024, reflecting a slowdown in consumer spending [3] - Total PCE prices rose 26% over the 12 months ending in July, while core PCE prices rose 29% [4][5] - Prices of goods increased 11% over the past 12 months, contrasting with the modest decline seen in 2024 [5] Impact of Tariffs - The effects of tariffs on consumer prices are now visible and are expected to accumulate, with uncertainty about timing and amounts [6] - A reasonable base case is that the effects of tariffs will be relatively short-lived, representing a one-time shift in the price level [7] - There is a risk that upward pressure on prices from tariffs could spur a more lasting inflation dynamic [8] Inflation Expectations - Measures of longer-term inflation expectations appear to remain well-anchored and consistent with the long-run inflation objective of 2% [10] - The industry will not allow a one-time increase in the price level to become ongoing inflation [10]