Below Zero: Fed Governor Would Not Be Surprised by Negative Job Growth Figure

Federal Reserve governor Christopher Waller stated Monday that a potential decline in job growth for January could lead the central bank to forgo an interest rate cut at its upcoming March meeting. Such a decision would likely be welcomed by President Donald Trump.

Concurrently, Waller suggested that the hiring increase observed last month, when employers added a significant number of jobs, might have been an isolated event. He indicated that he would need to see a similarly positive jobs report next month to confirm an improvement in the labor market, which he characterized as being quite weak in 2025.

Waller’s cautious stance represents a notable change from January, when he was one of two Fed governors who supported the central bank’s decision to maintain its key interest rate at its current level, following three rate reductions at the close of the previous year. This decision kept the Fed’s short-term rate at approximately 3.6%.

When the Federal Reserve lowers its interest rate, it can eventually result in more affordable borrowing for mortgages, auto loans, and business loans, although these rates are also influenced by financial market conditions.

Waller also commented that the Supreme Court’s decision to invalidate many of Trump’s tariffs would likely have a minimal effect on the economy and inflation, and therefore would not alter his perspective on interest rates.

He acknowledged that the ruling could “have a positive impact on spending and investment,” but added that “how large the impact may be and how long it could last is unclear.”

Waller further pointed out that the White House is attempting to reinstate tariffs through other legislative avenues, creating “considerable uncertainty over to what extent tariffs will continue.”

If February’s jobs report mirrors last month’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 stated in remarks delivered at a conference hosted by the National Association for Business Economists.

“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.”

“As things stand today, I rate these two possible outcomes as close to a coin flip,” Waller added.

The Fed governor also addressed a puzzle that many economists have observed in the current economy: solid growth, yet minimal job creation last year. Waller expressed his belief that even the modest job gains reported earlier this month for the previous year will ultimately be revised downward 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 remarked. “I don’t even know quite how to think about this.” He suggested that hiring could accelerate this year, largely resolving this discrepancy.

An alternative explanation could be increased productivity, a consequence of the pandemic, as businesses learned to produce more with fewer employees.

Trump criticized the Fed on Friday following the government’s report that the economy grew at a slower pace in the final three months of last year compared to the summer and fall. Growth decelerated to an annual rate of 1.4%, down from 4.4% in the fall.

“LOWER INTEREST RATES,” Trump posted. “‘Two Late’ Powell is the WORST!!” he added, misspelling his common nickname for Chair Jerome Powell, whom he has previously referred to as “Too Late.”