Blowout jobs: A headache for Fed, or a back-to-2019 gift?

A blowout January employment report and continued record numbers of job openings have left the US Federal Reserve with a growing dilemma of whether to take its cue about future inflation from a labor market that seems to remain on fire or take solace in the fact that, at the same time, wage growth continues to cool.

- HOWARD SCHNEIDER

Even as firms added more than half a million jobs last month, the growth in average hourly earnings fell to 4.4 per cent from 4.8 per cent the month before, continuing a decline from around 6 per cent last spring.

The dissonance in the data will be a key puzzle for policymakers to resolve as they plot their next interest rate moves. At a high level it showed the US economy continuing a stunning rebound in jobs despite the ravages of the pandemic, with payroll employment now on track to return to its pre-pandemic trend level sometime his year. For the Fed, the question is whether the economy can continue from here to the low inflation, low unemployment days seen before the coronavirus struck in 2020, or whether a continued decline in inflation will require a looser labor market and higher joblessness.

Analysts were struggling Friday to parse the underlying story, with some suggesting data and statistical revisions may be distorting the numbers, while others were seeing potentially constructive dynamics at work.