Solid job gains in January could mean the Fed can skip a rate cut at its next meeting in March, Federal Reserve Governor Christopher Waller said Monday in remarks to a conference held by the National Association for Business Economists.
Holding steady would likely spur more attacks by President Donald Trump, the Associated Press reported.
Waller said last month’s pickup in hiring, when employers added a more-than-expected 130,000 jobs, could have been a one-time gain, and he said he would need to see a similarly positive report next month to conclude the job market is improving. He previously said the job market was very weak in 2025.
The AP noted that Waller’s hedging is a notable shift from January, when he was one of the two Fed governors to dissent against the central bank’s decision to hold its key rate steady after three rate cuts at the end of last year.
The decision to hold steady left the short-term rate at about 3.6%.
High Court Strikes Down Tariffs
A reduction in the Fed rate, over time, can lead to cheaper borrowing for mortgages, auto loans, and business loans, though those rates are also influenced by financial markets.
Waller noted that the Supreme Court’s decision to strike down many of Trump’s tariffs likely would have only a limited impact on the economy and inflation, and therefore wouldn’t affect his view on rates.
The ruling could have “a positive impact on spending and investment,” Waller said, but “how large the impact may be and how long it could last is unclear.”
He also said that the White House is seeking to reimpose the tariffs using other laws, creating “considerable uncertainty over to what extent tariffs will continue.”
If February’s jobs report is similar to January’s, “indicating that downside risks to the labor market have diminished, it may be appropriate” to keep the Fed’s short-term rate “at current levels and watch for continued progress on inflation and strength in the labor market,” Waller said in his remarks.
“But if the good labor market news of January is revised away or evaporates in February,” he continued, “a cut should be made at the March meeting.”
Few Jobs Added Last Year
“As things stand today, I rate these two possible outcomes as close to a coin flip,” Waller added.
Waller also addressed a conundrum many economists have identified about the current economy: Growth is relatively solid, yet employers added few, if any, jobs last year. He said he thinks even the meager gains reported earlier this month for last year will eventually be revised to below zero.
“This would be the first time in my career, my life, that I saw an economy growing like this, and zero job growth,” Waller said. “I don’t even know quite how to think about this.” He added that hiring could pick up this year and largely resolve the contradiction.
Another explanation proffered could be higher productivity, stemming from the pandemic, as companies learned to produce more with fewer workers.
