The Federal Reserve spent a lot of 2022 and 2023 narrowly specializing in inflation as policymakers set rates of interest: Costs have been rising means too quick, in order that they grew to become the central financial institution’s prime precedence. However now that inflation has cooled, officers are extra clearly factoring the job market into their selections once more.

One potential problem? It’s a really tough second to evaluate precisely what month-to-month labor market information are telling us.

Jerome H. Powell, the Fed chair, mentioned throughout a information convention on Wednesday that the way in which the job market formed up in coming months may assist to information whether or not and when the central financial institution lowered rates of interest this yr. A considerable weakening may prod policymakers to chop, he recommended. If job progress remained speedy and inflation remained caught, however, the mixture may preserve the Fed from reducing rates of interest anytime quickly.

However it’s tough to guess which of these eventualities could play out — and it’s trickier than traditional to find out how scorching as we speak’s job market is, particularly in actual time. Fed officers will get their newest glimpse at simply how robust the job market is on Friday morning, when the Labor Division releases its April employment report.

Hiring has been speedy in latest months. That may usually make economists nervous that the financial system was on the cusp of overheating: Companies would run the chance of competing for a similar staff, pushing up wages in a means that might finally drive up costs.

However this hiring growth is totally different. It has come as a wave of immigration and staff coming in from the labor market’s sidelines have helped to notably improve the availability of obtainable candidates. That has allowed firms to rent with out depleting the labor pool.

But the bounce in out there staff has additionally meant that one of many fundamental measures that economists normally use in assessing the job market’s power — payroll good points — is not offering a transparent sign. That leaves economists turning to different indicators as they attempt to consider the power of the job market and to forecast its ahead momentum. And people measures are delivering totally different messages.

Wage progress remains to be very strong by some gauges, however it appears to be cooling by others. Job openings have been coming down, the unemployment rate has ticked up not too long ago (notably for Black workers) and hiring expectations in business surveys have taken a flip for the more serious.

The takeaway is that this appears to be a robust job market, however precisely how robust is difficult to know. It’s even more durable to guess how a lot oomph will stay within the months to return. If job good points have been to gradual, would that be an indication that the financial system was starting to buckle, or simply proof that employers had lastly satiated their demand for brand new hires? If job good points have been to remain robust, would that be an indication that issues have been overheating, or proof that labor provide was nonetheless increasing?

“By way of a pre-pandemic lens, the financial system appears to be like fairly robust, perhaps even scorching,” mentioned Ernie Tedeschi, a analysis scholar at Yale Regulation Faculty who was, till this spring, a White Home financial adviser. However given the entire good points to labor provide, “perhaps we shouldn’t use a pre-pandemic lens for excited about the financial system proper now,” he mentioned.

Friday’s jobs report is anticipated to point out that job good points remained speedy in April: Economists are forecasting a 240,000 individual bounce in payrolls, based on a Bloomberg survey.

That may be a continuation of the pattern over the previous yr. The financial system added 247,000 jobs per thirty days on common between March 2023 and March 2024. To place that in context, the financial system had added 167,000 jobs within the yr by means of March 2019, the final spring earlier than the onset of the coronavirus pandemic.

The Fed’s coverage committee voted this week to maintain rates of interest at 5.3 %, the place they’ve been set since July. Mr. Powell signaled that they’re more likely to keep at that comparatively excessive stage longer than beforehand anticipated, as officers await proof that inflation is poised to chill additional after months of stalled progress.

However whereas the trail forward for value will increase would be the fundamental driver of coverage, Mr. Powell mentioned that “as inflation has come down, now to beneath 3 %,” employment additionally “now comes again into focus.”

For now, Fed officers haven’t been overly apprehensive about speedy job good points. Mr. Powell famous on Wednesday that the financial system had been capable of develop extra strongly in 2023 partly as a result of the labor provide had expanded a lot, each due to immigration and since extra individuals have been taking part within the job market.

“Bear in mind what we noticed final yr: Very robust progress, a extremely tight labor market and a traditionally quick decline in inflation,” Mr. Powell mentioned. “I wouldn’t rule out that one thing like that may proceed.”

However, Mr. Powell hinted that Fed officers have been maintaining a tally of wage progress. He recommended repeatedly that robust wage will increase alone wouldn’t be sufficient to drive the Fed’s selections.

However the Fed chair nonetheless signaled that latest wage good points have been stronger than the Fed thought can be in line with low and steady inflation over time. As firms pay extra to draw staff, many economists assume that they’re more likely to increase costs to cowl climbing labor prices and shield revenue margins.

Pay good points stay robust by key measures. Knowledge this week confirmed {that a} measure of wages and advantages that the Fed watches carefully, referred to as the Employment Value Index, climbed extra quickly than anticipated firstly of 2024.

“We don’t goal wage will increase, however within the longer run, when you have wage will increase working larger than productiveness would warrant, there will probably be inflationary pressures,” Mr. Powell mentioned this week. With regards to slowing down wage good points to a sustainable tempo, “we’ve a methods to go on that.”

Whether or not job good points and wage good points will stay so speedy is unclear.

Invoice Kasko, the president of a white-collar employment placement company in Dallas, mentioned that whereas he continued to see robust demand for staff, he additionally seen employers turning into pickier because the outlook for rates of interest and the looming presidential election stoked uncertainty. They wished to see extra job candidates, and take longer to make selections.

“There’s nonetheless demand, it’s simply not shifting as rapidly,” Mr. Kasko mentioned.

If employers begin to pull again extra concertedly and unemployment begins to rise, that could possibly be sufficient to prod the Fed to decrease rates of interest, Mr. Powell made clear this week. He recommended {that a} “significant” rise in unemployment may prod the central financial institution to decrease charges.

The upshot? In a world the place it’s laborious to inform whether or not sturdy hiring numbers are an indication that the labor market is scorching or just altering, it looks as if officers can be extra alarmed by a marked job market slowdown than by robust continued payroll good points.

“There’s an asymmetry in how they view the labor market,” mentioned Michael Feroli, the chief U.S. economist at J.P. Morgan.

Ben Casselman contributed reporting.