Below zero: Fed governor wouldn’t be surprised at negative job growth number

Federal Reserve governor Christopher Waller said Monday that solid job gains in January could mean the central bank can skip a rate cut at its next meeting in March, a decision that would likely spur further attacks by President Donald Trump.

At the same time, 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. He said he would need to see a similarly positive report next month to conclude the job market, which he noted was very weak in 2025, is improving.

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 left the Fed’s short-term rate at about 3.6%.

When the Fed reduces its rate, over time it can lead to cheaper borrowing for mortgages, auto loans, and business loans, though those rates are also influenced by financial markets.

Waller also said that the Supreme Court’s decision to strike down many of Trump’s tariffs would likely 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,” he said, but “how large the impact may be and how long it could last is unclear.”

Waller also noted 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 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 said in remarks to a conference held 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 conundrum many economists have identified about the current economy: Growth is relatively solid, yet employers added few, if any, jobs last year. Waller said he thinks even the meager gains reported earlier this month for last year will be eventually 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 could be higher productivity, stemming from the pandemic, as companies learned to produce more with fewer workers.

Trump attacked the Fed on Friday after the government reported that the economy grew more slowly in the final three months of last year than in the summer and fall. Growth slowed 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 usual nickname for Chair Jerome Powell, who he has referred to previously as “Too Late.”

This story was originally featured on Fortune.com