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When the government issues the November jobs report on Friday, it could provide clarity on whether hiring and pay growth are gradually cooling — a trend that the Federal Reserve sees as vital in its fight against high inflation.
In a closely watched speech Wednesday, Fed Chair Jerome Powell pointed to a robust job market as a key driver of higher prices, particularly in services industries, ranging from restaurants and health services to entertainment and pet care.
Powell said the Fed would like to see slower job growth and more modest wage gains in the coming months. The cost of such goods as used cars, furniture and appliances, Powell noted, are easing, and housing costs will likely slow next year. That leaves price acceleration in much of the economy’s vast service sector as the most likely source of persistent inflation pressures. Those price spikes, the Fed chair said, largely reflect rising pay.
“We want wages to go up strongly, but they’ve got to go up at a level that is consistent with 2% inflation over time,” he said.
Yet for now, paychecks are growing at about a 5% annual pace, among the fastest in decades, and about 1.5 percentage points higher than what the Fed would prefer. Wages still trail inflation, which was 7.
