Jerome Powell’s Prized Labor Market Is Back. Can He Keep It?

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But now a tantalizing possibility is emerging: Can America both tame inflation and keep its labor market gains? Data last week showed that price increases are beginning to moderate in earnest, and that trend is expected to continue in the months ahead. The long-awaited cool-down has happened even as unemployment has remained at rock bottom and hiring has remained healthy. The combination is raising the prospect — still not guaranteed — that Mr. Powell’s central bank could pull off a soft landing, in which workers largely keep their jobs and growth chugs along slowly even as inflation returns to normal. “There are meaningful reasons for why inflation is coming down, and why we should expect to see it come down further,” said Julia Pollak, chief economist at ZipRecruiter. “Many economists argue that the last mile of inflation reduction will be the hardest, but that isn’t necessarily the case.” Inflation has plummeted to 3 percent, just a third of its 9.1 percent peak last summer. While an index that strips out volatile products to give a cleaner sense of the underlying trend in inflation remains more elevated at 4.8 percent, it, too, is showing notable signs of coming down — and the reasons for that moderation seem potentially sustainable. Housing costs are slowing in inflation measures, something that economists have expected for months and that they widely predict will continue. New and used car prices are cooling as demand wanes and inventories on dealer lots improve, allowing goods prices to moderate. And even services inflation has cooled somewhat, though some of that owed to a slowdown in airfares that may look less significant in coming months.