Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

I guess our basic feeling was that, if just the spending data had been weak, we would have probably had greater pause about downweighting the strength of the labor market segment. But we’ve also seen a weakness in industrial production, which is in physical product data as well. Then there’s considerable noise in labor productivity, and the unemployment rate is typically a lagging indicator. So we thought that for now we would give more weight to the spending data as providing a signal that we probably have entered a period of below-trend growth than to the signals given by the labor market, which as I indicated in my briefing could be read as at trend or maybe above trend. We’re looking for labor markets to be a bit of a lagging indicator this time around. We’re anticipating some slowing in labor demand going forward and some bounceback in the unemployment rate. But I wanted to make clear in my briefing that, although we didn’t dismiss the labor market, we did downweight it; and if our forecast is going to turn out to be right, we will have to see some slowing in labor markets relatively soon to confirm the basic story.

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