The Federal Reserve may see glimmers of light in Friday’s jobs numbers: the slowing pace of job creation and the return of more workers to the labor force.

Fed Chair Jerome Powell will definitely like the wage-related data in this report. Average hourly earnings growth slowed from 4.8% year over year in November to 4.6% in December. That’s down from a peak of 5.6% in March. 

In the past year, wage growth has been hot, with hourly earnings at times rising twice as fast as they did before the pandemic. For the Fed, the report is welcome news, said Aaron Terrazas at job site Glassdoor.

“Slowing wage growth was, without a doubt, the silver lining in this report for inflation hawks,” he said. “The fact that it came down to the slowest pace we’ve seen since August 2021 — when the labor market really started to take off — that is certainly a hopeful sign.”

Folks who work in human resources and recruitment see the labor market going from a rolling boil to more of a steady simmer.  

With more workers flowing back into the labor force, companies don’t have to poach from their competitors as much, according to Jim McCoy at the ManpowerGroup.

It eases the “pressure on employers to increase wages to attract employees from other employers,” he said.

There’s also less motivation on the employee side to demand higher wages, McCoy added. Gas prices are down and people aren’t commuting as much, “taking a little bit of the pressure off employees necessarily needing outsize pay raises to keep pace with overall inflation.”

But that overall inflation is still pretty high.

“Inflation was roughly 7.1% over the year,” said Sania Khan, chief economist at the recruitment technology firm Eightfold AI. “We saw wages grow roughly 4.6%. So although the dollar amounts have been increasing on their paychecks, we’re still seeing a decline in their real wages.”

“It is not good for workers, and it is not good for the economy,” said Michael Mitchell with the advocacy group Groundwork Collaborative. 

The Fed’s efforts to cool the labor market will hit low-wage workers the hardest, as their pay has been going up the most. Mitchell argues that the central bank should pause its interest rate hikes — before they push unemployment higher and drag down workers’ purchasing power.