Fed's Waller: Never seen the economy growing like this without jobs

Fed's Waller: Never seen the economy growing like this without jobs

Fed’s Waller: Economy Grows Strongly Amid Weak Job Creation

Federal Reserve Governor Christopher Waller highlighted a striking divergence between robust economic growth and fragile labor market conditions in a speech on February 23, 2026. "I've never seen the economy grow like this without jobs," he remarked, noting that real GDP expanded at a 1.4% annual rate in Q4 2025, supported by solid consumer and business spending. However, job creation in 2025—the weakest outside a recession since 2002— remains a critical concern.

Waller emphasized that the January 2026 employment report, which showed 130,000 jobs added, was a "welcome surprise" but cautioned that the data may reflect noise rather than a sustained trend according to Waller. The gains were concentrated in healthcare and construction, while other sectors saw job losses. Private-sector estimates from ADP and Revelio, which reported just 22,000 and 3,000 jobs added, respectively, further muddied the picture. Waller stressed that one month of strong data does not signal a labor market turnaround, particularly after years of weak hiring.

Underlying inflation, excluding tariff-driven effects, has approached the Fed's 2% target, but labor market risks remain. Waller dissented at the January FOMC meeting, advocating for a rate cut to address the fragile job market, though the Committee opted to hold rates steady. He acknowledged that the March meeting's decision will hinge on February's employment and inflation data, which will clarify whether January's gains reflect a genuine recovery or temporary factors.

The Fed's challenge lies in balancing growth and employment. While GDP growth is supported by resilient consumer spending and business investment, lower-income households—45% of total spending—are showing signs of strain, with reduced discretionary purchases. Meanwhile, the Supreme Court's recent ruling to overturn major tariffs introduces uncertainty, though Waller said he would "look through" their temporary inflationary effects according to Waller.

As the Fed awaits February data, Waller's remarks underscore a pivotal question: Can the economy sustain growth without broad-based job creation? The answer will shape monetary policy in the coming months.

(https://www.federalreserve.gov/newsevents/speech/waller20260223a.htm): Federal Reserve Governor Waller's speech, February 23, 2026.