Labor market is telling us we should continue cutting rates, says Fed Governor Chris Waller

Steve Liesman (Senior Economics Reporter) 00:00.350

start chairman no governor waller just call me

Christopher Waller (Governor) 00:04.230

chris chris OK chris

Steve Liesman (Senior Economics Reporter) 00:06.470

let me start with the jobs data we got yesterday which i think is people are wondering how the federal reserve is processing and how you're personally processing this data here we had a tick up to the unemployment rate at four point six percent return to job growth in november

Steve Liesman (Senior Economics Reporter) 00:25.200

after job losses in october what's the state of the labor market in your opinion

Christopher Waller (Governor) 00:29.520

well earlier this summer when the jobs numbers were looking very good i had a lot of anecdotal evidence talking to CEO 's around the country and other sources of soft data that told me the labor market wasn't doing that well people were kind of like what's he talking about and

Christopher Waller (Governor) 00:46.310

then the august august first of july jobs report came out and everything was revised down pretty dramatically and so we've now come around to this view that the labor market is very soft the jobs numbers are around fifty to sixty thousand in the last couple months on average we

Christopher Waller (Governor) 01:04.910

know that that's too high and those are most more likely to get revised down when we get the unemployment insurance administrative data later it'll take a while before we get that but board staff is estimating take off another fifty or sixty thousand jobs so we're close to zero

Christopher Waller (Governor) 01:21.030

job growth now that's that's not a healthy labor market now we expect that to kind of come back in the in twenty twenty six due to a lot of tariff uncertainty going away our rate cuts have helped try to soften things up going forward that was a whole point of doing these

Christopher Waller (Governor) 01:39.150

preemptive rate cuts that we started in september and then also a lot of the fiscal bill from will probably have some impact and then you know we'll see if the AI stuff really starts kicking in with serious measurable productivity so twenty twenty six could turn out to be a a

Christopher Waller (Governor) 01:56.000

better year in terms of that now whether that pulls the labor market along with it i'm certainly hope it does but right now my focus as a governor has just been to focus on the labor market inflation i'm not particularly worried about it i know it's above target but i believe

Christopher Waller (Governor) 02:10.760

it's coming it'll start coming down the next three to four months and so the critical thing for me is the employment leg of our dual mandate and inflation will come back down and we see that when you look at market pricing inflation expectations tips and things like this it's

Christopher Waller (Governor) 02:26.270

pretty well anchored around two percent

Steve Liesman (Senior Economics Reporter) 02:28.390

chris if you're already at zero does that mean you're behind the curve

Christopher Waller (Governor) 02:33.710

well that's what i'm saying that what we don't quite know is how much of this is like AI driven when i go around and talk to CEO 's around the country everybody 's telling me look we're not hiring because we're waiting to try to figure out what happens with AI what jobs can we

Christopher Waller (Governor) 02:50.310

replace what jobs we don't that's sort of stall and hiring could be just temporary after a while people like nah we still need these people to do this or that or they don't so we don't quite know yet what the AI impact is going to be on the labor market but i think we got

Christopher Waller (Governor) 03:05.750

started cutting in september i think those cuts will come in as we go forward in the in the next year the

Steve Liesman (Senior Economics Reporter) 03:12.550

record you wanted to cut in july i wanted

Christopher Waller (Governor) 03:14.630

to cut in july yes i felt like it was needed that was before we got the jobs revisions again people thought i was nuts but the data came in and said look that guy was right

Steve Liesman (Senior Economics Reporter) 03:26.430

i want to go back to the same question though are if you're already doing a goose egg on jobs are you behind the curve and is further stimulus needed now

Christopher Waller (Governor) 03:35.710

well i i personally i don't speak for the committee but i personally think because i don't think inflation is going to there's not going to be any reacceleration of inflation there's no forces that are suggesting that inflation is going to take off again in twenty six if

Christopher Waller (Governor) 03:48.390

anything the tariff effects whatever they may be those will start coming off as a one time price effect so we're not going to see persistent inflation from it so if i believe inflation is under control inflation expectations anchored standard central bank wisdom as you look

Christopher Waller (Governor) 04:04.470

through one off price effects like a tariff would be if it has our inflation effects then the labor market 's telling you we should continue cutting the rates and that's kind of my my view about things

Steve Liesman (Senior Economics Reporter) 04:15.110

and the journalists central bank reporter handbook says to ask the governor how much should you cut rates

Christopher Waller (Governor) 04:22.870

well i don't think there's any we're not seeing a dramatic decline of the labor market going off a cliff it's just kind of just continuing to just soften it and soften so we can we can go at a moderate pace i don't think we have to do anything dramatic if you have to do

Christopher Waller (Governor) 04:38.760

something dramatic it's too late usually you're you've you've waited waited too long so