I don’t know if you’ve noticed but every time someone in the Fed starts warning about the labor market, they talk like the system itself is fine but just misfiring temporarily.
Waller is doing that now. He says the labor market is weaker than it looks and wants to cut interest rates early, not because inflation is fixed but because the private sector only added 74,000 jobs last month. That number is important because it’s the lowest since late 2024 and it’s coming at a time when the Fed has been trying to cool down the economy without killing it.
What Waller’s suggesting is that we’ve probably already hit the wall and the jobs engine is running out of gas. What he didn’t say is that the labor market always looks better on paper than it feels in real life because it’s propped up by assumptions.
You get a job report and they’ll tell you it’s fine because supply slowed too. That’s what John Williams said. Lower immigration balances out lower hiring. But that only makes sense if you’re measuring it like a spreadsheet, not like someone working three jobs just to get by. That’s why when Waller says payroll gains are flashing red, I listen. Because the Fed always waits too long.
They don’t want to admit a slowdown until it’s confirmed six different ways.
Tariffs were also part of this talk.
He downplayed them, saying they won’t affect inflation much. That goes against what others at the Fed have been saying, especially with new tariffs set to drive up import costs. What I took from it is that Waller isn’t talking to the public, he’s positioning himself. There’s talk that he might replace Powell, and this entire speech felt like a move. I’ve seen it before, the policy stuff is real but the timing always tells you who’s trying to build credibility ahead of a shift.
If job growth keeps slowing, he’ll look like the only one who saw it early.