WASHINGTON  – The US Federal Reserve is “not forecasting or expecting a recession” its chairman Jerome Powell said in Zurich on Friday (Sept 6), on the heels of a mixed August jobs report released in Washington.

But analysts expect an interest rate cut within weeks. Asked specifically about this, Mr Powell – who has been under fierce public pressure from President Donald Trump to cut rates, would only say the Federal Reserve “would act as appropriate to sustain the expansion”.

The report, while below expectations, relieved recession fears. But the return of optimism still hinges on the outcome of talks with China, which are expected to resume at a senior level next month when China’s Vice-Premier Liu He and his delegation are due to visit the United States.

Returning to the table was in itself a good thing, White House economic advisor Larry Kudlow said.

“It is good thing that they’re coming here, and tempers are calmer now,” Mr Kudlow told CNBC.

But he refused to predict anything, saying “We’re engaged in very important discussions across the board, whether it’s agriculture or IP (intellectual property) or tech transfer or cloud or cyber-hacking or trade barriers. You know, we’ll see what happens.”

“This is the first face-to-face meeting now in several months,” he noted.

“But I don’t want to predict. I’m just saying I think it’s very positive that we negotiate. And it may well be… that something positive comes out of that.”

“President (Donald) Trump himself continues to say  we will make a deal, as long as it’s a good deal for the United States work force and the economy, and the President himself believes China wants to make a deal because they are not doing well,” he added.

In Zurich, Mr Powell predicted continued if moderate economic expansion. While there remain “significant” downside risks, “incoming data for the US suggests that the most likely outlook for the US is still moderate growth, a strong labour market, and inflation continuing to move back up,” he said.

The United States’ jobs report for August, with headline numbers below expectations, shows that the economy is being propped up by consumer spending, analysts said.

The economy added just 130,000 new jobs in August – evidence that hiring has slowed. But the unemployment rate remained at 3.7 per cent for the third month in a row, meaning the number of unemployed persons, at six million, remained essentially unchanged.  

Employment in the federal government rose, largely reflecting the hiring of temporary workers for the 2020 Census, analysts said. The mining sector lost jobs, but there were gains in health care and financial services.

In network TV interviews, Mr Kudlow, who is director of the National Economic Council, put his best possible spin on what was an unexciting report, citing positive household survey data.

The household data showed that more workers aged 25 to 54 were working or seeking work. Wages were also holding up, with average hourly earnings up 3.2 per cent from August 2018.

There is general agreement on this.

Renaissance Macro Research tweeted: “This was a meh jobs report. But, the Household survey was considerably stronger than the Establishment Survey. The employment to population ratio has jumped to a cycle high. Labour market conditions are still improving, on net, albeit more slowly than before.”

Mr Sal Guatieri, senior economist and director at BMO Capital Markets, told Market Watch the details of the report were better than the headline.

“The economy is slowing, but continues to cruise near long-run potential,” he said.

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