Federal Reserve Chair Jerome Powell has raised concerns about the noticeable slowdown in U.S. job creation, underlining the need for policy action to support the cooling labor market. Speaking at a recent conference, Powell pointed out that although the unemployment rate remained low through August, job gains have dropped substantially, citing lower immigration and declining labor force participation as key factors.

Official September jobs data is still awaited due to the ongoing U.S. government shutdown, but private sector reports confirm weaker hiring trends. This softening in the labor market has raised the risk of rising unemployment and potential drag on economic growth, according to Powell and most analysts.

“In this less dynamic and somewhat softer labor market, the downside risks to employment have increased,” Powell said, noting that long-term inflation expectations still align with the Fed’s 2% target. However, he acknowledged that Federal Reserve policy may now have to err on the side of supporting the job market, rather than only fighting inflation.

Back in September, policymakers at the Fed cut rates by a quarter-point for the first time in 2025 and signaled there could be up to two more rate cuts this year. Market expectations are now overwhelmingly pointing to another 50 basis points in cuts across the final two Fed meetings in October and December.

Powell also hinted the central bank could soon wind down its reduction of balance sheet assets, emphasizing that ensuring ample liquidity is now a top priority. As Fed policy pivots towards economic stabilization, markets and businesses are closely watching for signals—and preparing for further rate adjustments before year-end.