“Significant and concerning”: Economist on why the Fed can’t rescue Trump

Former President Donald Trump may be counting on the Federal Reserve to deliver an interest rate cut at its upcoming meeting, but according to economist Jason Furman, the Fed’s influence is limited.

Furman highlighted that job growth has plunged, averaging just 29,000 per month recently — far below the 82,000 monthly average under Joe Biden between May and August 2024, and even further from Biden’s 168,000 monthly average throughout last year.

While the Fed could trim rates by 25 basis points at its September 16 meeting, Furman stressed that monetary policy cannot fix the root problem. “The biggest reason the Fed cannot solve the labor slowdown is that its tools can only stimulate labor demand — getting businesses to invest and hire more — but the real issue is labor supply,” he wrote.

The decline, he explained, stems from a sharp slowdown in labor force growth due to reduced immigration.

Furman argued that while the Fed should adjust policy with the changing outlook, the only person who can truly boost job creation without triggering inflation above target is Donald Trump himself. His conclusion: unless Trump reverses his policies on immigration and tariffs, the Fed will only be able to cushion a fraction of the damage.