Waller questions January job data, hints at policy pause
Federal Reserve Governor Christopher J. Waller expressed skepticism about the strength of the January employment report, questioning if it signals a true labor market rebound. He indicated his stance on monetary policy for the upcoming March FOMC meeting will depend on further economic data.
January jobs: Signal or noise?
Governor Waller dissented at the January Federal Open Market Committee (FOMC) meeting, favoring a rate cut due to perceived labor market risks and underlying inflation near 2 percent.
He noted the January employment report showed 130,000 new jobs, stronger than expected.
However, Waller expressed concerns that these gains were concentrated in few sectors like healthcare and construction, and that initial January reports often see downward revisions.
Private sector data from ADP (22,000 jobs) and Revelio (3,000 jobs) also conflicted with official numbers, leading him to await the February report for a clearer picture of the labor market's health.
He emphasized that one month of good news does not constitute a trend, especially after a weak 2025 for job creation.
Economic activity shows mixed signals
Waller noted solid overall economic activity, with Q4 2025 real gross domestic product (GDP) growth at 1.4 percent at an annual rate and private domestic final purchases up 2.4 percent.
Business surveys indicated a pickup in January, with manufacturing production increasing 0.6 percent and services activity growing for the 19th straight month.
However, household spending showed signs of softening, with Personal Consumption Expenditures (PCE) growth slowing from 3.5 percent in Q3 2025 to 2.4 percent in Q4. He highlighted a divergence between resilient high-income shoppers and lower-to-middle-income customers reducing discretionary purchases, potentially masking broader weakness.
The year 2025 was "extraordinarily weak" for job creation, averaging only 15,000 jobs per month.
Patience warranted, data is key
Waller believes underlying inflation, excluding tariff effects, is close to the Federal Reserve's 2 percent target, despite headline CPI and PCE figures being higher.
He emphasized that the upcoming February employment and inflation data will be crucial for his outlook.
If data supports a continued labor market improvement and progress toward 2 percent inflation, his view may tilt toward a pause at the March FOMC meeting.
Source: Waller, Labor Market Data: Signal or Noise?
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