The economy is on a positive trajectory now – inflation is falling, the labor market is steady, and unemployment is low

The economy is doing what it needs to do to achieve probably its best possible near-term outcome: inflation falling while keeping unemployment low, all the while staying out of a recession through the rest of this year. Recent data shows the labor market has performed well, inflation continues to cool after being at such a high rate, and the housing market is showing some signs of resilience. This may be music to the Federal Reserve's ears, as the central bank considers whether to slow the economy even further. The Fed's ideal "soft landing" is a balancing act between slowing the economy to bring inflation down while ensuring growth stays strong and unemployment doesn't get too high. That's exactly what's happening in the economy right now. The job market is cooling down but still strong Hiring slowed dramatically in June, while still remaining high compared to before the pandemic, adding 209,000 nonfarm payroll jobs, nearly 100,000 less than the revised growth in May. Job creation on the whole has slowed from the year's highs in January, with some industries such as retail losing jobs from May to June. The latest jobs report is "mostly what the Fed wants to see, which is the labor market sort of coming back into balance, no longer overheating and being sort of sustainable, steady, robust, those kinds of words, rather than sort of exceptionally hot and supply constrained," Julia Pollak, chief economist at ZipRecruiter, told Insider on Friday. Additionally, the most recent Job Openings and Labor Turnover Survey for May reveals job openings are still high, while continuing their overall downward trend, echoing the job growth figures in showing a cooling but still-strong labor market. And despite a year of the Fed raising interest rates to fight inflation, unemployment is still remarkably low. The unemployment rate fell in June to 3.6% after rising by 0.3 percentage points in May. Other measures also show that the job market is still very healthy. The prime-age employment-population ratio, the share of people in the 25 to 54 age range with a job, surged from 80.7% to 80.9%, the highest since April 2001. Nick Bunker, economic research director for North America at the Indeed Hiring Lab, told Insider that the slowing but still good employment data suggests the US is heading toward stronger and more sustainable growth. "It's just a matter of, is this pace of moderation quick enough for the Federal Reserve?" Bunker said. "Is this a trend that'll have more time to play out, or will tighter monetary policy or some other stumbling block get in the way of seeing how painless this recalibration can be?" Inflation is coming down as fast as it went up Inflation as measured by the Consumer Price Index rose by just 3.0% in June from a year prior, a great sign for Americans' wallets and the lowest rate since March 2021. Inflation had been dramatically cooling before the latest report out Wednesday. The year-over-year change in this index has slowed ever since peaking back in June 2022 at 9.1%. Core CPI, which excludes food and energy, has been extremely high, but it also cooled in June. After a year-over-year increase of 5.3% in May, the index rose by a smaller 4.8% year over year in June. Wage growth as seen by year-over-year changes in average hourly earnings has also plateaued. Despite that plateau, the fall in inflation means that real wages are up on average. Data from the National Federation of Independent Business released Tuesday revealed the number of small businesses that raised their prices fell in June to the lowest level since March 2021, dropping to just 29%. This suggests small businesses have adjusted to still-rising prices, despite about 90% of owners reporting they had few or no qualified applicants for job openings.