TL;DR
Federal Reserve Governor Christopher Waller said on Nov. 10 that strong economic growth and inflation still above the Fed’s target make further monetary tightening necessary, in his view. He also questioned whether a labor market with both low hiring and low separations is healthy over the longer term. His remarks are his assessment, not a new decision by the Federal Open Market Committee.
Federal Reserve Governor Christopher J. Waller said he expects further monetary tightening will be needed to bring U.S. inflation back toward the Fed’s 2% medium-term goal, while warning that a labor market with unusually low hiring and job separations may be losing dynamism. In a speech delivered Nov. 10 in London, he stressed that this was his policy outlook, not an announcement of a new Federal Open Market Committee decision.
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Waller said he supported the FOMC’s decision at its most recent meeting to hold the policy rate steady. He explained that prior Fed communication had led financial markets to price in some tightening, and that the exact timing of rate increases mattered less than carrying them out within a reasonable period. If expected increases were not implemented, he said, market expectations could fall and financial conditions could loosen.
His assessment of activity was broadly positive. Waller cited an initial estimate that real GDP grew 3.4% in the third quarter, supported by consumer spending and business investment, including high-tech equipment linked to AI. He expected growth to ease somewhat in the current quarter as consumer spending slowed, while remaining solid.
Waller said the unemployment rate was 4.1% in October. Payroll gains were 165,000 in October, with 85,000 added to estimates for the prior two months. Because monthly job creation has been volatile, he pointed to average gains of about 80,000 per month over six and 12 months as a clearer signal. He said that pace was consistent with labor supply and demand being roughly in balance.
Rate Outlook Meets a Stable Labor Market
Waller’s remarks matter because they set out how one Fed policymaker is weighing solid growth and a steady labor market against inflation that he considers too high. His support for a recent rate hold does not mean he favors leaving policy unchanged: he argued that previously signaled increases should still be delivered in a reasonable period. The speech does not establish when, or by how much, the FOMC will act.
His questions about labor-market turnover also point beyond headline job growth. A stable unemployment rate can coexist with fewer workers changing jobs or being hired. Waller said reduced dynamism could matter for productivity growth and real wages, though he did not claim the available data had settled that issue. Those concerns could inform longer-run economic and policy discussions, but his speech offered no specific policy response to them.
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The Fed’s Low-Hire, Low-Fire Puzzle
Waller described the labor market as having been in a “low hire, low fire” state for more than a year. He said both hiring and separations—including layoffs and quits—were low compared with earlier periods. That combination differs from the usual pattern he outlined: hiring tends to be stronger in a robust labor market, while weak conditions often feature elevated firing.
He distinguished net employment changes from the much larger number of people moving into and out of jobs. As an example, he said September’s net gain of 60,000 jobs was accompanied by more than 5 million separations and more than 5 million hires. The figures illustrate why monthly payroll growth alone does not describe the full scale of labor-market movement.
“The U.S. economy is growing strongly, with a labor market that has brought employment close to its long-term rate. But inflation remains too high.”
— Christopher J. Waller, Federal Reserve governor
Open Questions on Jobs and Inflation
Waller raised questions about whether lower labor-market turnover reflects a lasting loss of dynamism and whether that would affect productivity or wages. He said he did not have answers. The speech excerpt also does not provide detailed evidence establishing the cause of low hiring and separations or how those rates may change.
The policy path is also unsettled. Waller did not specify the timing or size of future increases, and his views do not by themselves represent an FOMC decision. The cited third-quarter GDP figure was an initial estimate; the figures and outlook in the speech should be understood as information available to him at the time, not a guarantee of future economic performance.
FOMC Decisions and Incoming Data
The next policy decisions will depend on the FOMC’s assessment of incoming data and broader economic conditions. Waller’s speech indicates he wants the committee to follow through on tightening that markets have already anticipated, but he did not identify a specific meeting as the point for action.
For the labor-market questions he raised, the next evidence will include subsequent readings on employment, hiring, separations, inflation and economic growth. Whether low turnover persists—and whether it affects productivity or real wages—remains to be seen.
Key Questions
Did the Federal Reserve announce a rate increase?
No. Waller said he supported the FOMC’s most recent decision to hold rates steady. He expressed his view that further tightening would be needed, but did not announce a new committee decision.
Why does Waller expect further tightening?
He said inflation remains too high and argued that policy should move inflation toward the Fed’s 2% medium-term goal. He did not give a schedule or size for future rate increases.
What does “low hire, low fire” mean?
It describes a labor market with both few hires and few job separations, including layoffs and quits. Waller said the combination has persisted for more than a year and is unusual compared with the patterns he described.
Is Waller saying the labor market is unhealthy?
He raised that as an open question, not a settled conclusion. Waller said low turnover may mean the labor market has lost some dynamism and could matter for productivity and real wages, but he said he did not have answers.
Source: bis.org
