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US employment will likely decline into 2025, according to new projections from a top Federal Reserve official, underscoring how the labor market weakened during the first year of Donald Trump’s second term.
Fed Governor Chris Waller said at a conference in Washington on Monday that official data from the Bureau of Labor Statistics – which showed job creation fell by an average of 15,000 new positions a month last year – had an “upward bias.”
Considering the possibility of further revisions to those figures next year, it seems “clear that payroll employment in the United States will probably fall in 2025,” Waller said.
According to data dating back to 1939, payroll declines have rarely occurred except in recessions. Waller said in the speech that it was “only the third year since 1945.”
The Fed cut short-term borrowing costs three times in the second half of last year amid signs that, after years of strong growth, the US labor market was deteriorating.
The 0.75 percent cut left the U.S. central bank’s benchmark federal funds target in the range of 3.5 to 3.75 percent.
The stronger-than-expected labor market report for January strengthened expectations that the Fed will control US borrowing costs at its next meeting in mid-March.
But Waller — who is seen as a more modest member of the rate-setting Federal Open Market Committee — said he would support another cut if the upcoming February jobs report comes in weak.
He said, “If January’s good labor market news is modified or disappears in February, it would support my position at the FOMC’s last meeting, that a (0.25 percentage point) cut in the policy rate was appropriate, and such a cut should be made at the March meeting.”
As things stood, he said, the chances he would support cuts were “close to a coin toss.” Waller was one of two FOMC voters who voted in favor of a cut in late January, when the rest of the committee called for keeping rates in place.
The Fed governor warned that the January BLS report may be “more noise than signal” about the future health of the US labor market.
Job gains were concentrated in health care and manufacturing — sectors that make up only about 20 percent of total employment, he said.
“Jobs were lost in many other sectors, which is more consistent with what happened in 2025,” the Fed governor said. “All this does not indicate that the overall labor market is moving towards a more robust position.”
Waller said the Supreme Court’s ruling on the illegality of most of Trump’s tariffs is unlikely to affect the Fed’s decisions.
He said, “Traditional central bank wisdom suggests we should ‘consider’ tariffs. I did so when they went up and I will do the same when they come down.” “Therefore, this decision is not likely to have a significant impact on my view of the appropriate policy stance.”
