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Chicago Fed President Austan Goolsbee noted that while the unemployment rate remains low, policymakers must balance labor market softening with progress on inflation.
"If employment starts falling apart or if the economy begins to weaken, of which you’ve seen some warning signs, you’ve got to balance that off with the progress you’re making on the price front," Goolsbee said.
"The unemployment rate is still quite low, but it has been rising," he said.
Workers' wage gains have also been slowing, with economists expecting June month-on-month average hourly earnings to land around 0.3% down from 0.4% in May.
Federal Reserve Chair Jerome Powell recently noted that the labor market is cooling off appropriately and moving toward a more sustainable level.
"Wage increases are still a bit above where they would wind up in equilibrium; but nonetheless, you can see the labor market is cooling off appropriately," Powell said.
"We’re watching it very carefully, but it doesn’t look like it’s heating up or presenting a big problem for inflation."
The overall labor force participation rate dipped in May to 62.5% from 62.7%, while employers appear to be shifting toward hiring more part-time workers.
Rachel Sederberg, senior economist at Lightcast, noted that while involuntary part-time workers have increased, their total numbers remain very low.
"They’d like full-time hours but can’t get them, which is potentially an indicator of a softening labor market," Sederberg said.
"That said, the number of people who are involuntarily part time are still very, very low."
