The Economic Outlook and Some Comments on My Policy Communication (Governor Waller, September 3, 2026)

… <p>More broadly, one signal of continuing business spending growth was another increase in July in sentiment among purchasing managers for nonmanufacturing firms—to a level that I would also describe as "solid." New orders for these firms, which represent the majority of businesses in the economy, continued to grow in July, and the index of supply problems continued to improve. Today we will get the August nonmanufacturing survey, so we will see if this trend continues.</p> <p>Combining the various pieces of the economy, I expect real GDP to grow a bit more than 2 percent this year, a respectable outcome considering the uncertainties I mentioned.</p> <p>Turning to the labor market, it is also in satisfactory shape. While there were indications in the second half of 2025 of easing labor demand, relative to supply, those signs evaporated. Job creation, though a bit volatile, has increased this year by an average of 60,000 a month through July. That is close to and probably a bit above estimates of what it takes to keep pace with the slow growth in the labor force—mostly because of much lower net immigration. Payroll gains have broadened to most sectors of the economy in recent months, and the unemployment rate has fallen a bit to 4.1 percent in July, a historically low rate and slightly below the median of FOMC participants' long-run or equilibrium rate. Layoffs and initial claims for unemployment insurance are likewise low. I expect more of the same tomorrow when we get the August employment report.</p> …