MIAMI—Federal Reserve Governor Christopher Waller warned Thursday that the U.S. labor market may already be shrinking, urging the central bank to cut interest rates at its September meeting to prevent a deeper downturn.
Speaking at the Economic Club of Miami, Waller said recent revisions to payroll data suggest private-sector job growth has stalled—and may even have turned negative in recent months. He cautioned that “weakening demand is not good,” dismissing arguments that lower immigration is making slower hiring less worrisome.
Waller reiterated that he favored a 25-basis-point cut at the Fed’s July meeting and argued the case for easing has only grown stronger as growth slows, tariffs weigh on investment, and businesses freeze hiring amid uncertainty over trade and artificial intelligence.
Inflation, he stressed, is near the Fed’s 2% target once temporary tariff effects are stripped out, leaving policymakers with more room to act.
“Proper risk management means the FOMC should be cutting the policy rate now,” he said, adding he supports a quarter-point cut in September and expects further reductions over the next six months.
While acknowledging that monetary policy is still moderately restrictive, Waller urged the Fed not to wait until unemployment rises further.
“I think it is important that the FOMC not wait until such a deterioration is under way and risk falling behind the curve,” he said.