Analysis: The bizarre divergence of U.S. economic data has put the Fed in a policy dilemma.

On November 24, the U.S. economy is exhibiting puzzling anomalies, causing concern among policymakers tasked with curbing inflation and maintaining a robust labor market. Data from the Labor Department shows job losses in June and August, with an average addition of only about 62,000 jobs over the three months ending in September. However, worker productivity, a key driver of economic output, remains high. The Gross Domestic Product (GDP), which measures all goods and services produced in the economy, also remains strong. This contradictory phenomenon of economic expansion coexisting with a weak labor market poses a dilemma for Fed policymakers, making it difficult for them to determine whether the economy needs to cool down or requires stimulus. Economists believe it is currently uncertain whether interest rate cuts can ultimately offset the erosive effects of significant policy changes on hiring. Ryan Sweet, Chief U.S. Economist at Oxford Economics, stated, “Fortunately, we have not yet seen mass layoffs; otherwise, a lack of job expansion could lead to an economic recession. The economy can grow without creating a large number of jobs, but that requires productivity to maintain good growth.” A lack of job expansion could quickly turn into an economic recession.