The Federal Reserve cut interest rates by a quarter point this week, but markets walked away with more questions than answers. Chair Powell offered little forward guidance, stressing that future moves will depend on the data. That is very different from the way past Fed chairs operated. Alan Greenspan in the 1990s and Ben Bernanke during the financial crisis often gave markets clear notice of what was coming. Investors could plan around that because the Fed more or less laid out the path. Powell is not doing that. He is deliberately cautious, reflecting how uncertain today’s economy is, with weak hiring on one side and tariff-driven inflation on the other.

The problem is that the data Powell relies on is often incomplete and subject to revisions. Employment reports, inflation readings, and GDP estimates can all look very different a few months later. In my view, that makes a strictly data-dependent approach somewhat flawed, because it risks guiding policy off information that is not always accurate in real time.

The Stagnant Labor Market

The most notable concern was not inflation but jobs. Powell acknowledged that companies are neither hiring aggressively nor firing in large numbers. He described it as a low firing, low hiring economy, noting, “The overall job-finding rate is very, very low. However, the layoff rate is also very low. So you’ve got a low firing, low hiring environment.” That is unusual. In past downturns, the story was one of mass layoffs followed by recovery. Today’s labor market is stuck in a holding pattern, where recent graduates and minority groups find it especially difficult to break in. As Powell put it, “People who are sort of more at the margins. So kids coming out of college and younger people, minorities are having a hard time finding jobs.”

AI and Structural Change

Artificial intelligence looms large in the background. Entry level hiring, which has historically been the bridge into corporate America, is being squeezed as companies automate routine tasks. Powell avoided pointing directly to AI as the culprit, but he admitted there is great uncertainty around its role.

This is another point where I differ. In my view, AI is not a marginal factor, it is already reshaping the entry point into the labor market. Companies are learning that software can handle many of the functions once reserved for interns, analysts, or new graduates. That is why we see weak job-finding rates even in a growing economy. Powell’s caution means he may be late in recognizing the magnitude of the shift.

The parallel is the late 1990s, when globalization and the rise of the internet dramatically reshaped manufacturing and office work. Policymakers underestimated the disruption at the time and only recognized the consequences years later. We may now be facing the same type of adjustment, only this time it is technology eliminating the rungs at the bottom of the ladder. And here is the key question: will a quarter point cut in interest rates even matter in the face of such structural change? In my view, it will not. What is needed is not a token cut but a meaningful reduction in borrowing costs that helps households manage debt. That kind of relief would support the real economy far more than what Powell describes as a “risk management” cut.

The Interest Rate Disconnect

Mortgage demand jumped early in the week as rates fell ahead of the Fed meeting. Refinance applications rose almost 60% in the week ending September 12, the highest since early 2022, as the average 30-year rate dipped to the lowest level since last October. This move came on expectations of an upcoming cut rather than the cut itself. After the Fed delivered what Powell described as a risk management cut, long-term yields rebounded and mortgage rates ticked up from their earlier lows. By week’s end the 10-year Treasury yield was around 4.13%, and average mortgage quotes moved higher. Inflation remains near 3% on a 12-month basis for August, which makes today’s mortgage levels look high relative to the price backdrop.

The Fed’s challenge is that this inflation is not wage-driven. Powell himself pointed to tariffs as the bigger risk. Tariff-induced price shocks have more in common with the oil embargo of the 1970s than with the overheating labor markets of the late 1960s or late 1990s. Higher interest rates are a blunt instrument against that kind of cost-push inflation. My view is that if rates were closer to 3% instead of 4%, inflation would look much the same, but households carrying car loans, mortgages, and credit card debt would be in a much stronger position. History shows that holding rates too high for too long risks breaking parts of the real economy without delivering much additional progress on prices.

The disconnect between Wall Street and Main Street has rarely been wider. The stock market is surging, fueled by technology investment and the infrastructure required to power AI. Investors see productivity gains and future profits. But for ordinary households, high borrowing costs are the headline. A 1% percent drop or more in rates might not change the long term growth outlook, but it could help millions of families manage their bills.

A Shift in Corporate Reporting

Beyond the Fed, another important development came from the SEC, which is considering a rule change that would allow companies to abandon quarterly earnings reports in favor of semiannual updates. The idea has surfaced before. In the 1970s, when quarterly reporting first became standard, critics argued it would push managers toward short term window dressing. Today the same debate is resurfacing, amplified by former President Trump’s call to end the practice.

Quarterly reporting has always been a double-edged sword. It creates transparency, but it also magnifies market reactions to tiny earnings misses. Warren Buffett has long argued that quarterly guidance distorts management decisions, and it would not be surprising to see Berkshire Hathaway adopt a six month cadence if given the choice. If the rule change goes through, it would mark the most significant shift in corporate disclosure since the SEC’s adoption of electronic filings in the 1990s.

The consequence for investors would be profound. With fewer scheduled checkpoints, market-moving information would increasingly flow from analyst meetings, shareholder presentations, and mid-cycle regulatory filings. Stocks would still react, but the timing would be less predictable. Instead of quarterly fireworks, markets would see more sudden jolts when outlooks are revised. That kind of volatility might create opportunities for day traders who speculate on short-term swings, especially in the world of daily and weekly options that dominate platforms like Robinhood. Unknowns and shocks are exactly what fuel those trades. But for long-term investors the adjustment process is the same. Prices will still find their level over time, and the long-term trajectory of a company will matter far more than whether it updates the market every three months or every six.

A Fragile Balance

Taken together, this week underscored the uneasy balance between policy and markets. The Fed is trying to preempt tariff-driven inflation that has not yet surfaced with interest rates that may already be too restrictive for households, all while relying on data that is flawed and frequently revised. AI is reshaping the labor market in ways that echo earlier industrial and technological revolutions, leaving new workers without a clear foothold, yet the Fed acts as if a 0.25% cut is meaningful in the face of such structural change. Meanwhile, the SEC is reconsidering one of the pillars of corporate reporting. These shifts reveal a broader truth: the institutions that guided the economy in past decades are being forced to adapt to new realities. The stock market may be thriving on AI and innovation, but the real economy is sending a far more complicated message.

Have a great weekend!

Sources

Fed Chair Powell on labor market: “The overall job-finding rate is very, very low. However, the layoff rate is also very low.”

Refinance applications rose almost 60% in the week ending September 12.

10-year Treasury yield reached approximately 4.13% by week’s end.

August inflation rate (12-month basis) remains near 3%.

Proposed SEC rule change regarding semiannual earnings reports.

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