How the labor market is doing is critical to the Fed’s setting of monetary policy given its dual mandate to steer the economy away from both too-high unemployment and too-high inflation. But gauging how the labor market is doing can be a stumper: Two different employment indicators point in different directions. … Less ambivalent are the indicators of wage inflation: All point to continued moderation. … We believe the labor market has been normalizing to its pre-pandemic state and remains robust. But what the Fed makes of the labor data and may do in response is another stumper. We’d like to see it keep monetary policy as is for now.
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