Federal Reserve officials are keeping a close eye on the job market as they contemplate when and whether they can cut interest rates this year. Friday’s jobs report offered early evidence of the type of moderation that they have been hoping to see.

Average hourly earnings, a measure of wage growth, climbed 3.9 percent in April from a year earlier. That was both cooler than the previous reading and slightly cooler than the 4 percent economists had forecast.

That moderation came as job gains slowed to 175,000 during the month, the unemployment rate ticked up slightly and average weekly hours nudged down. The overall picture was one of a labor market that remains solid but is gradually slowing — exactly what officials at the Fed have been looking for.

Central bankers generally embrace a strong job market: One of their two mandates from Congress is to foster maximum employment. But when inflation is rapid, as it has been since 2021, officials worry that a hot labor market could help to keep price gains elevated. If employers are competing for workers and paying more, they are likely to also try to charge more, the theory goes. And workers who are earning slightly bigger paychecks may have the wherewithal to pay more without pulling back.

“The more jobs reports you get like this,” then “the more confident we can be that the economy is not overheating,” Austan Goolsbee, the president of the Federal Reserve Bank of Chicago, said in a Bloomberg Television interview. Mr. Goolsbee does not vote on monetary policy this year.

At the Fed’s policy meeting this week, officials kept interest rates at 5.3 percent, the highest level in more than two decades. The central bank started 2024 expecting to cut rates several times, but those plans have been delayed by surprisingly stubborn inflation.


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