FILE PHOTO: Federal Reserve Governor Christopher Waller speaks during The Clearing House Annual Conference in New York City, U.S. November 12, 2024. REUTERS/Brendan McDermid/File Photo

By Howard Schneider

WASHINGTON (Reuters) - Federal Reserve Governor Christopher Waller said on Friday that private data shows the job market remains weak and buttresses the case for further interest rate cuts, but added the U.S. central bank need only move in "cautious" quarter-percentage-point steps as it evaluates the economy.

The U.S. jobs report for September has been delayed by the ongoing federal government shutdown, but Waller said that private data reports, like the recent one from payroll processor ADP showing a contraction in employment last month, have been consistent in showing the job market losing steam.

Alternate sources of information on the job market "are not really representative ... but they are all telling the same story. The labor market is weak," Waller said on CNBC's "Squawk Box" program. "We need to cut rates. But we need to be kind of cautious about it ... Do 25 (basis points), keep going, see how it goes."

Waller, reportedly on an evolving short list of candidates to replace Fed Chair Jerome Powell next year, said his call for caution stemmed from the contrast between data that show economic growth may be strengthening after a modest first half of the year, and a job market that "is not tight in any way shape or form."

"Something has got to give. Either the labor market rebounds to match the GDP growth, or ... GDP growth is going to pull back. Whichever way that goes, it's got to affect what you do with policy," Waller said.

His view is aligned with the broad consensus at the Fed that rates will continue to fall this year, but contrasts with the call by new Fed Governor Stephen Miran for deep and immediate reductions in borrowing costs.

"You adjust as you go, as the data comes in. If you went 75 (basis points) tomorrow, you'd have a bit of a problem if you had the wrong bet," Waller said.

The Fed, which cut rates by a quarter of a percentage point last month, will hold its next policy meeting on October 28-29. Investors anticipate it will reduce rates by a quarter of a percentage point this month, following up with the same-sized reduction in borrowing costs at its final meeting of the year in December.

Other policymakers in recent days have revived concerns about persistent inflation and said the Fed may not have much room to lower rates further without risking renewed price pressures.

But if the job market is as weak as it seems, "you're not going to get the typical thing people are afraid of ... Prices go up. Workers demand higher wages. Those wages get passed through and you get these kind of wild price wage spirals," Waller said. "That's not happening."

(Reporting by Howard Schneider; Editing by Alison Williams and Paul Simao)