Analysis: The bizarre divergence in U.S. economic data has left the Federal Reserve mired in policy confusion

On November 24th, the US economy is experiencing puzzling anomalies, which has unnerved policymakers charged with the dual mandate of curbing inflation and maintaining the labor market. Labor Department data showed that employment fell in June and August, with the average number of new jobs added in the three months to September only about 62,000. Yet worker productivity, a key driver of economic output, remained high. Gross domestic product, a measure of the output of all goods and services in the economy, also remained strong. The contradiction between this economic expansion and the weakness of the labor market has created difficulties for Federal Reserve policymakers, making it difficult for them to determine whether the economy needs cooling or stimulus. Economists believe that it is uncertain whether interest rate cuts will ultimately offset the corrosive effect of major policy changes on hiring. Ryan Sweet, chief US economist at Oxford Economics, said: "Fortunately we have not seen large-scale layoffs, otherwise a jobless expansion would turn into a recession. The economy can grow without creating a lot of jobs, but only if productivity growth remains good." A jobless expansion could quickly turn into a recession.