Today’s jobs report showed that the labor market is still strong. The unemployment rate is 3.5 percent, which is just as low as it was pre-pandemic. The number of jobs now equals what it was pre-pandemic as well.
That’s a speedy recovery after a deep recession, and it is certainly better than the agonizingly slow labor-market recovery after the Great Recession.
The problem is that inflation is still at 9 percent. Nominal spending is still growing well above trend. The Fed still needs to tighten.
The Fed has been concerned about harming the labor-market recovery with its monetary policy. That’s a reasonable concern, and unemployment is part of the Fed’s mandate from Congress. But unemployment is looking just fine. Inflation is not. The Fed runs many risks right now; being too hard on the labor market does not appear to be one of them.