Will US unemployment rate stay below 4.5% through Q2 2026?
The Condition
Fed cuts ≥25bp at March 18, 2026 FOMC meeting
Our Ensemble Estimates
Given Fed cuts ≥25bp: Will US unemployment rate stay below 4.5% through Q2 2026?
Given Fed holds: Will US unemployment rate stay below 4.5% through Q2 2026?
Causal Effect
A surprise cut slightly reduces confidence in labor stability (-7pp), potentially because the signal effect (Fed sees weakness) outweighs the stimulus effect at short horizons
Why This Matters
Tests whether a rate cut supports the fragile low-churn labor equilibrium. Unemployment is at 4.0% but the labor market is in a LOOSENING regime with JOLTS openings-to-unemployed below 1.0, narrow job growth composition concentrated in defensive sectors, and a low hiring rate. A cut could signal the Fed sees labor market risk, potentially improving business confidence and hiring intentions. But the low-churn equilibrium means the labor market has little buffer against negative shocks.
Resolution Criteria
BLS Employment Situation report for every month from March through June 2026 shows U-3 unemployment rate below 4.5% (seasonally adjusted)
Source Analysis
U-3 above 4.5% for two consecutive months signals transition from LOOSENING to SLACK