Fed’s Ideal Jobs Scenario Is Looking More Plausible
The central bank’s extraordinarily narrow path to taming inflation without driving up unemployment and tipping the economy into recession is looking a little bit wider.
The hot jobs market shows signs of cooling.
Photographer: Olivier Douliery/AFP via Getty Images
The Federal Reserve’s extraordinarily narrow path to taming inflation without driving up unemployment and tipping the economy into recession is looking a little bit wider.
Inflation has surged to the worst in 40 years mainly because consumer demand is outstripping relatively scarce goods and services, while the labor market is so hot that there are two jobs available for every unemployed person, resulting in steep wage gains. The ideal path to more sustainable wage growth and, hopefully, slower inflation entails enticing more workers back into the labor force, including older workers who took early retirement during the pandemic, while nudging companies to slow hiring without necessarily firing workers.