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Note: Mr. Waller seems to have been prescient: The Bureau of Labor Statistics said on Wednesday that "job growth over the past two years was far weaker than previously believed: U.S. employers added just 181,000 jobs last year."Strong monthly jobs growth and easing unemployment have pushed back expectations about when the Federal Reserve will lower interest rates again, suggesting the central bank is poised for an extended pause. Data released on Wednesday by the Bureau of Labor Statistics showed monthly jobs growth of 130,000 positions, almost double what economists had forecast, and the unemployment rate ticking down to 4.3 percent. That is down from a recent peak of 4.5 percent in January and slightly lower than December’s level.
The unemployment rate has become a focal point for the Fed, as President Trump's immigration restrictions have decreased the supply of new workers available for hire, and the number of new jobs the economy needs to keep the unemployment rate stable has dropped as a result, with research suggesting it could turn negative by this year.
Price pressures have mounted as Mr. Trump’s tariffs have taken effect, and officials at the Fed broadly expect the peak impact from those levies to hit in the first quarter of this year. January’s Consumer Price Index report will give policymakers insight into whether that forecast is bearing out. Economists expect annual inflation to tick down to 2.5 percent after a 0.3 percent increase in monthly prices. “Core” inflation, which strips out volatile food and energy items, is expected to stay sticky at 2.5 percent, only slightly lower than the previous 2.6 percent annual pace.
But in a sign that labor-related price pressures remain muted, the employment cost index, a quarterly measure from the Labor Department that tracks changes in wages and benefits, unexpectedly slowed in the final three months of 2025. Economists at Evercore ISI said that data confirmed their view that the “economy is cooling under the hood.”
Stephen I. Miran, who has dissented at every meeting since he joined the Fed in September, voted in favor of a quarter-point cut. He was joined by Christopher J. Waller, who, In explaining his dissent, said that revisions to the jobs data would likely show no growth in employment last year: “Zero. Zip. Nada,” Mr. Waller said- “this does not remotely look like a healthy labor market.”
Further cuts appear to hinge on the labor market breaking out of its current “low hire, low fire” state and layoffs beginning to pick up in a more broad-based way, or inflation significantly slowing. Mr. Powell last month downplayed the possibility of a rate increase this year.
In a social media post on Wednesday after January’s report was released, the president again called for the country to be paying the lowest interest rate in the world and said it would lead to cost savings of at least $1 trillion a year related to payments to service the national debt. But the Fed does not take into consideration interest payments on the debt when setting policy. It is congressionally mandated to pursue low, stable inflation and a healthy labor market.
© 2015 Mutual Fund Observer. All rights reserved.
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Comments
- The current monthly job figure is for January 2026 while the downwardly revised annual figure was for 2025.
- One cannot extrapolate a year's performance from one month's. https://www.fidelity.com/news/article/top-news/202602110843RTRSNEWSCOMBINED_KBN3P11JU-OUSBS_1
In Nov 2024, prices actually dropped by 0.1% (BLS CPI figure). That too was a fluke. Prices rarely go down and one could not extrapolate annual deflation for 2024 from this one month.
See also the monthly job growth graphic in this CNBC piece. Job growth was negative in four months of 2025 and generally anemic in the other months. Over the course of the year, that didn't add up to much growth. The 130K growth reported for January is higher than every month in 2025.
https://www.cnbc.com/2026/02/11/jobs-report-january-2026-.html
Which in itself is something rather impressive, especially as the lies accumulate. As Sir Walter Scott observed:
Oh what a tangled web we weave,
When first we practice to deceive.