Chair Jerome Powell isn’t as pleased with the robust U.S. job market as you might think he’d be, and he and the Federal Reserve plan to do something about it: Take it down a notch.
On Thursday, Powell described the job market as “extremely, historically” tight and “unsustainably hot.” Available jobs are near record highs. Wages are rising at their fastest pace in decades. The unemployment rate is flirting with a half-century low, and layoffs are sparse.
Yet Powell doesn’t see all of this as purely a cause for celebration. With the highest inflation in four decades hurting households and businesses, the Fed chair regards the job market’s strength as a key driver of spiking prices.
But Powell is also betting that that very strength will give the Fed an unusual opportunity to cool the economy and fight inflation without derailing the job market or causing a recession. The Fed hopes to reduce the huge number of job openings, rather than spur layoffs. Fewer available jobs, in turn, would slow wage increases and help tame inflation.