Joe Weisenthal live from Jackson Hole: labor market weakness is keeping September rate cut 'very live'

Summary

Powell's Jackson Hole speech on August 22 kept a September rate cut firmly on the table, triggering a broad risk-on rally. Ethereum surged 12% and Circle stock jumped nearly 10% on the day, despite Circle's revenue being directly tied to the federal funds rate, a move that reinforces its identity as a crypto proxy rather than a rate-sensitive financial institution.

The speech was complicated by its five-year framework review context, meaning the volume of inflation language was structural rather than signaling. What mattered for near-term policy was Powell's explicit flag on the labor market side of the Fed's dual mandate as the primary source of concern, a notable dovish tilt given the backdrop.

The labor market debate remains unresolved. The May and June downward revisions to employment data can be read two ways. The bearish interpretation holds that tariffs hit the economy as economists predicted, and the slowdown is real. The bullish counter-argument is that those months represented peak uncertainty, and with considerably more tariff clarity now available as of late August 2025, hiring conditions may already be improving. The data does not resolve the question cleanly.

The inflation picture adds further complexity. A recent producer price index report stoked concern that price pressures had not fully dissipated. Jeffrey Schmidt, president of the Kansas City Fed, said publicly that scenarios exist in which the next move could be a rate increase rather than a cut, given equity market levels, unemployment, and inflation. Powell's dovish lean at Jackson Hole landed against that relatively hawkish regional Fed backdrop, amplifying the market reaction.

The September Fed meeting is described as genuinely open. The August jobs report, due in early September, is the next critical input. On the question of BLS methodology changes, the newly nominated BLS head, EG Anthony, has not yet been confirmed, and the broad expectation is that no structural changes to how the jobs report is constructed will arrive before the August release.

On AI and the labor market, the formal theme of this year's Jackson Hole symposium was the labor market in transition. A panel discussion on AI was scheduled, though without a dedicated research paper. The view from economists present is that AI is a serious theoretical concern for the future of the labor market but has not yet surfaced as a measurable policy variable in current data.

The structural composition of US job growth draws concern on its own terms. The most recent jobs report showed 73,000 jobs added, with roughly 48,000 in health care and 25,000 in social services, essentially the entirety of net gains concentrated in care for an aging population. Data center construction represents the other primary growth driver. The combination of an economy dependent on elder care employment and AI infrastructure investment, both backstopped by equity wealth effects, is flagged as a fragile foundation, particularly given how much consumer spending and corporate investment behavior is tied to stock market performance.