Chicago Fed chief says a softer jobs market isn’t recessionary, urging policymakers to resist front‑loading easing while inflation proves sticky

WASHINGTON – A top Federal Reserve official is urging caution on interest‑rate cuts, warning that a soft patch in hiring is not, by itself, a recession signal and that inflation progress has stalled. In remarks reported this week, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said he would be “uncomfortable with overly front‑loading a lot of rate cuts” and noted that inflation is “now heading the wrong way.”

Goolsbee’s comments land just days after the Federal Open Market Committee delivered a quarter‑point cut, bringing the target range for the federal funds rate to 4.00%–4.25%. Markets have been weighing the odds of one or two additional cuts before year‑end. Goolsbee—who supported last week’s move—signaled he does not want that easing path to become automatic.

“We’ve still got a mostly steady and solid jobs market,” he said, arguing that payroll volatility and headline weakness should be weighed against broader measures of labor turnover and regional data that still point to stability. The national unemployment rate, at 4.3%, remains low by historical standards even after a summer slowdown in hiring.

His caution contrasts with investors’ hopes for a rapid sequence of reductions to offset tighter financial conditions and tariff‑related headwinds. It also complements the message from Chair Jerome Powell, who this week warned that cutting “too aggressively” could leave the inflation fight unfinished and force a reversal—a mistake the Fed is keen to avoid after a multi‑year slog back toward its 2% target.

The immediate policy puzzle is that inflation, which cooled steadily through late 2024 and early 2025, has proved sticky in recent readings. After stripping out volatile components and temporary tariff effects, most estimates still peg underlying inflation in the mid‑2s—above target and no longer improving month‑to‑month. That’s the backdrop for Goolsbee’s line that price pressures are “heading the wrong way,” a phrase that signals unease with assuming a painless glide‑path to 2%.

Why not sprint toward lower rates anyway? For one, the Fed wants to preserve its credibility after declaring detente too soon in past cycles. For another, officials fear that an aggressive pivot would reignite housing and risk‑asset demand before supply can catch up, re‑stoking the very price pressures they are trying to tame. Goolsbee’s framework—shaped by his pandemic‑era emphasis on supply dynamics—sees policy as ‘mildly restrictive’ right now; the task is to calibrate easing so the real rate glides down while inflation, wages and productivity re‑align.

Labor data complicate the timing. September’s weaker job gains and a slight uptick in unemployment have spooked parts of Wall Street, reviving talk of a hard landing. But measures like quits, vacancies and the jobs‑workers gap suggest a cooling, not a collapse. The Chicago Fed’s regional readouts, Goolsbee noted, show a labor market downshifting rather than stalling. That matters because recessions typically begin with broad‑based deterioration across industries and geographies—something not yet visible.

There are policy cross‑currents beyond the Fed’s control. New and proposed tariffs have pushed some import prices higher, while immigration restrictions have pinched labor supply in sectors that relied on foreign‑born workers. Both developments can distort headline data. Goolsbee has cautioned against treating such shocks as purely demand‑side problems solvable by lower interest rates; in his telling, some of the 2023–24 disinflation was driven by repaired supply chains, and unwinding that progress could keep inflation sticky even as growth slows.

Inside the Fed, the debate now centers on pace. Doves argue that waiting risks over‑tightening into a weakening labor market. Hawks counter that the costs of a premature slashing of rates are larger than the costs of patience—especially if expectations were to drift higher again. Goolsbee lands somewhere in the middle: open to further cuts if the data require them, but resistant to a “set‑and‑forget” sequence.

Financial markets are trying to square that circle. Treasury yields have seesawed as traders handicap the likelihood of an October cut versus a pause, while equities have alternated between relief rallies on softer data and pullbacks on sticky inflation. Mortgage rates, highly sensitive to the 10‑year yield, have inched lower from their summer peak but remain elevated by pre‑pandemic standards, keeping affordability tight.

For households and businesses, the message is to expect gradualism. Even if the Fed trims rates once or twice more this year, officials want to avoid signaling a race back to neutral. Credit remains available but pricier; balance sheets, overall, are healthier than in past cycles; and wage growth continues to cool without collapsing. That mix is not a classic recession setup.

What could change the calculus? A sharp break in payrolls across service industries, a pronounced rise in unemployment that is broad‑based across demographics, or renewed acceleration in core prices would each force a re‑think. Conversely, a few months of convincingly softer inflation prints—without a steep drop in employment—would give cover for additional, measured cuts.

Goolsbee’s intervention is less about dissent than discipline. The Fed has already pivoted from the peak of tightening; the question is whether it can land the plane without re‑igniting turbulence. Calling the jobs market “mostly steady and solid,” he is asking colleagues and markets to treat September’s wobble as data to be weighed, not destiny to be feared.

For now, the center of gravity at the Fed appears to favor moving slowly, watching the incoming data and guarding hard‑won credibility. If inflation behaves, easing can continue. If it doesn’t, officials like Goolsbee want the option to pause. Either way, the message from the Chicago Fed chief is clear: don’t confuse a slowdown with a slump—and don’t mistake wishful thinking for a strategy.

Context & Sources

• Financial Times interview/report with Austan Goolsbee (Sept. 24–25, 2025).

• Reuters summary of Goolsbee remarks cautioning against aggressive cuts (Sept. 24, 2025).

• Bloomberg reporting on Goolsbee’s stance that inflation warrants a careful pace (Sept. 23, 2025).

• Chair Jerome Powell remarks cautioning against cutting “too aggressively” (Sept. 24, 2025).