Fed's Bowman says she sees more signs of stabilizing labor market

Fed's Bowman says she sees more signs of stabilizing labor market

Federal Reserve Vice Chair for Supervision Michelle Bowman highlighted signs of tentative stabilization in the U.S. labor market while emphasizing ongoing fragility in a January 2026 speech according to her remarks. She noted that the unemployment rate edged down to 4.4% in December and has remained relatively stable since mid-2025, though job gains have been concentrated in nonbusiness service industries like healthcare as reported. Private payroll employment growth averaged approximately 30,000 per month in the fourth quarter, below the level needed to offset population growth and maintain a stable unemployment rate according to data.

Bowman acknowledged that labor market conditions have weakened over the past year, with rising part-time employment for economic reasons and a record 26% share of long-term unemployed workers in December as stated. However, she observed that initial unemployment insurance claims remain low and that businesses have largely retained workers despite reduced hiring. She cautioned that the labor market remains vulnerable to deterioration if demand weakens further, particularly as hiring rates are already subdued according to her analysis.

On monetary policy, Bowman reiterated her support for a proactive approach to address employment risks. The Federal Open Market Committee (FOMC) has cut the federal funds rate by 75 basis points since September 2025, bringing it closer to her estimate of neutral. She emphasized the importance of remaining prepared to adjust policy further if labor market conditions fail to stabilize, while noting that inflation, excluding tariff effects, is nearing the Fed's 2% target according to her remarks.

Bowman's remarks underscore a balanced assessment: while early signs of labor market resilience exist, structural vulnerabilities persist, necessitating continued vigilance from policymakers as she concluded.