BUNDS: BUXL Block trade

NY Fed President Williams (permanent FOMC voter) on CNBC doesn't sound particularly concerned about the state of the labor market, in particular downplaying the weak nonfarm payrolls growth implied by the July employment report's downward revisions. While not contradicting Fed Chair Powell's apparent Jackson Hole signal of a likely September cut, which was based largely on a shift in the balance of risks to employment, Williams doesn't make the case for a cut here.

• Williams: "I think the state of the labor market is solid. We've definitely seen a slowdown in the pace of hiring, in payroll growth, as you mentioned. I think some of that is really a slowdown in the supply of labor...we're seeing slower supply and slower demand. And the hard thing to do is to figure out well, is, is one slowing more than the other? The test of that is kind of the unemployment rate. The unemployment rate has been pretty, pretty steady, low 4s. Hasn't really changed over the last 12 months. Other indicators, I think, have, I would say, gently softened over the past year, but again, still a solid labor market." Meanwhile, "wage growth continues to be, I would say, consistent with a solid labor market and inflation coming down towards our 2% goal. "
• Asked if he wouldn't "hit the panic button" if payroll growth remained weak, instead paying attention to the unemployment rate, wage growth and other gauges, Williams said "that's absolutely right... [but] if payroll growth became very negative.. that's, I think that's telling you something different." When asked, he doesn't provide an estimate of "breakeven" payrolls gains.
• Asked if he's on board with a rate cut: "in my view, if the economy evolves in the way I hope it will, and that means that inflation, you know, after adjusting for the tariff inflation comes down over the next couple of years, the economy stays in relatively good balance, I do think at some point we need to move interest rates closer to normal or or a neutral stance. We are still in a, I would say, modestly restrictive stance."
• And specifically about a September cut: "I definitely think that every meeting is [on the table] from my perspective... again, the risks are more in balance, and we have to just see how kind of have the data play out."

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