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US employment probably fell in 2025, underscoring how the labour market weakened during the first year of Donald Trump’s second term, according to new projections by a top Federal Reserve official.
Fed governor Chris Waller said at a conference in Washington on Monday that official data from the Bureau of Labor Statistics — which show job creation fell to an average of 15,000 new positions a month last year — contained an “upward bias”.
Waller said, accounting from the likely further revision in those figures next year, it seemed “clear that payroll employment in the United States probably fell in 2025”.
Declines in payrolls have rarely occured outside of recessions, according to data stretching back to 1939. Waller said in the speech it was “only the third year that has happened since 1945.”
The Fed cut short-term borrowing costs three times over the second half of last year, amid signs that, after years of strong growth, the US labour market was deteriorating.
The 0.75 percentage points of cuts have left the US central bank’s benchmark federal funds target at a range of 3.5 to 3.75 per cent.
A stronger than expected labour market report for January has cemented expectations that the Fed will hold US borrowing costs at its next meeting, held in mid-March.
But Waller — who is seen as a more dovish member of the rate-setting Federal Open Market Committee — said he would support another cut, should the forthcoming February jobs report come in weak.
“If the good labour market news of January is revised away or evaporates in February, it would support my position at the FOMC’s last meeting, that a [0.25 percentage point] reduction in the policy rate was appropriate, and that such a cut should be made at the March meeting,” he said.
He said, as things stood, the possibility he would back a cut was “close to a coin flip.” Waller was one of two FOMC voters who backed a cut at the late January vote, when the rest of the committee called for rates to be left on hold.
The Fed governor warned that the BLS report for January may have contained “more noise than signal” about the future health of the US labour market.
Job gains were, he said, concentrated in healthcare and construction — sectors that constitute only around 20 per cent total employment.
“Many other sectors lost jobs, more consistent with what happened in 2025,” the Fed governor said. “All this does not suggest the whole labour market is heading for a more robust footing.”
Waller said the Supreme Court’s ruling on the illegality of most of Trump’s tariffs was unlikely to impact the Fed’s decisions.
“Traditional central bank wisdom suggests that we should ‘look through’ tariffs. I did this when they went up and will do so if they come down,” he said. “So, this ruling is unlikely to have a significant impact on my view of the appropriate stance of policy.”