STEVE INSKEEP, HOST:
Every six weeks, a committee meets at the Federal Reserve. Chairman Jerome Powell and others carefully study the economy and often do nothing, which is often what you want the Fed to do. They've kept interest rates steady at relatively high levels to choke off inflation. They don't want to keep rates up too long, though, or they will choke off economic growth. Lower inflation and rising unemployment have led to anticipation of a rate cut next month. Austan Goolsbee of the Federal Reserve Bank of Chicago is on the committee. He's not one of the members who will vote on interest rates, but he's been watching the data.
AUSTAN GOOLSBEE: When things start to go wrong in the job market, they don't tend to do so at a slow basis. It tends to go up like a rocket and down like a feather in that space.
INSKEEP: Oh. Thanks for the reminder. When the unemployment rate went above 4%, I read some commentary that that was a kind of important, or even psychologically important, barrier, that it might go much farther once you get past 4%.
GOOLSBEE: That's always the danger. Historically, if the unemployment rate starts going up, if temporary employment numbers go negative, that's kind of a leading indicator. There are some various leading indicators of recession, and some of those are giving warning lights. But there's cross currents. The GDP growth numbers for the last quarter were a little stronger than we expected. So there's a reason why we do this - we, the FOMC - meet every six weeks, is because the mission is never done. We're going to keep coming back and revisit where we are in the economy on these dual-mandate goals - maximize employment, stabilize prices. That's what the law tells us to do.
INSKEEP: I think I just heard you use the phrase leading indicators of recession. Other than employment, which we just mentioned, what other indicators are there?
GOOLSBEE: Credit card delinquencies rising is a warning. Small business defaults rising, that's also a warning. And rising unemployment rate is a warning. On the other side, you've got GDP growth - still been pretty strong. And there are pockets of strength throughout the economy. So that's the job. The watched pot may never boil, but, you know, the Fed's job is to kind of sit and watch the pot and to figure out is it boiling or freezing or what's happening.
INSKEEP: This, in the end, boils down to whether you use that one big tool of an interest rate cut. When the September meeting comes, if it were up to you, would that be the time for the cut?
GOOLSBEE: Well, I don't like committing, say, here's exactly how I'm going to vote or here's what I'm going to express an opinion at the next meeting when we've still got a bunch of information to come in, and I still would want to hear from my colleagues. But you don't want to tighten any longer than you have to. And the reason you would want to tighten is if you're afraid the economy's overheating. And this is not what an overheating economy looks like to me.
INSKEEP: And you're saying that you don't want to be too specific about what you might recommend, but, I mean, a small interest rate cut, a large one, quarter point, half point, more?
GOOLSBEE: (Laughter) Look, this is what I'm saying. I don't - if you've ever seen a picture of the meeting room, it's a huge table, like, one of the biggest tables I've ever seen in my life. So everything can fit on that table. Everything is always on the table. The long arc over the last year and a half is inflation is way down; unemployment is creeping up; the job market is cooling. And we want it to stabilize at something like full employment. And there are concerns that it's - whether it's going to stop there.
INSKEEP: Austan Goolsbee, it's a pleasure talking with you again. Thanks so much.
GOOLSBEE: Yeah. Great to talk to you again, Steve.
INSKEEP: He's president of the Federal Reserve Bank of Chicago. Transcript provided by NPR, Copyright NPR.
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