Press conference exchange between VICTORIA GUIDA and Fed Chair Jerome Powell:

user: Hi, Victoria Guida with Politico. I wanted to ask about the labor market. You mentioned early on, again, that job openings are very high compared to available workers, and I’m just curious to what extent you do and don’t draw signal from that. So, for example, if wage growth is slowing and if maybe the unemployment rate starts to tick up, will that make you decrease your focus on job openings? What do you see—are wages what’s really important? How are you thinking about the labor market as it relates to inflation?

assistant: So we talk a lot about vacancies in the—vacancy-to-unemployed rate, but it’s just one, it’s just another data series. It’s been unusually important in this cycle because it’s been so out of line. But so has quits. So have wages. So we look at a very wide range of data on the unemployment—on the labor market. So I’d start with unemployment, which is typically the single statistic you would look to, is at a 50-year low, 3½ percent. We’re getting really nothing in labor supply now. We had, I think, very small increase this year, which we had really thought, we thought we would get that back. Most analysts thought we would get some labor supply coming in. You mentioned wages, so I guess I would characterize that as a mixed picture. It’s true, with average hourly earnings, you see—so I would call it a flattening out at a level that’s well above the level that would be consistent over time with 2 percent inflation, assuming a reasonable productivity. With the ECI reading this week, again, a mixed picture. The headline number was a disappointment. Let’s just say it was high. It didn’t show a decline. There’s some rays of light inside that if you look at private-sector workers—that did come down, that compensation did come down. Overall, though, the broader picture is of an overheated labor market where demand substantially exceeds supply. Job creation still exceeds the level that would hold the market where it is. So that’s the picture. Do we see—we keep looking for signs that sort of the beginning of a gradual softening is happening. And maybe that’s there, but it’s not obvious to me, because wages aren’t coming down—they’re just moving sideways at an elevated level, both ECI and average hourly earnings. We want to see—we would love to see vacancies coming down, quits coming down. They are coming down. Vacancies are below their all-time high but not by as much as we thought, because—and the data series is volatile, we never take any one reading, we always look at two or three. So it’s a mixed picture. I don’t see the case for real softening just yet. But we look at, I guess as I just showed you, we look at a very broad range of data on the labor market.

user: So do you see wages as being a significant driver of inflation?

assistant: I think wages have an effect on inflation and inflation has an effect on wages. I think that’s always been the case. There’s always—going back and forth, the question is, is that really elevated right now? I don’t think so. I don’t think wages are the principal story of why prices are going up. I don’t think that. I also don’t think that we see a wage–price spiral, but, again, it’s not something you can—once you see it, you’re in trouble. So we don’t want to see it. We want wages to go up—we just want them to go up at a level that’s sustainable and consistent with 2 percent inflation. And we think we can—we do think that, given the data that we have, that this labor market can soften without having to soften as much as history would indicate through the unemployment channel. It can soften through job openings declining. We think there’s room for that. But we won’t know that—that’ll be, that’ll be discovered empirically.