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No idea where the economy is headed? You’re not alone.

This week brought a blast of economic data but precious little clarity on what it all means.

The ultralow unemployment rate isn't sustainable.Spencer Platt/Getty

Wages are rising, but not as fast as the cost of living. While employers are hiring at a torrid pace, the job market is tighter than skinny jeans on a sumo wrestler.

This week we got a blast of detailed readouts on the economy yet precious little clarity on what they all meant. Good news, like near-record unemployment, was seen by many on Wall Street as a sign that inflation will only get worse. It’s tough to know whether we should be bullish on the future or fearful.

Just look at the conflicted stock market, which has been on a roller coaster ride that puts the Six Flags folks to shame.


“An extraordinarily challenging and uncertain time.” That’s how Jerome Powell, chairman of the Federal Reserve, summed it up on Wednesday.

But Powell was 100 percent certain about one thing: “Inflation is much too high,” he told reporters after the Fed announced its biggest interest rate hike since 2000.

Powell said the central bank would continue to raise rates until inflation — which is running at three times its 2 percent target — has retreated. The Fed’s inflation-fighting strategy also includes draining money from the financial system by shrinking its $9 trillion of bond holdings.

The theory behind the central bank’s plan is Economics 101. The overheated demand for goods and services that is driving up prices will be cooled off by steeper borrowing costs. Consumer purchases usually made with credit — washing machines, vacations, cars, new homes — will moderate. Businesses will be more cautious about expanding and hiring.

Of course, when the Fed throws cold water on a hot economy, some people lose their jobs. Home prices don’t climb as quickly, and may even fall. And the value of college saving and retirement plans tends to decline.


The question confounding investors is whether the Fed’s one-two monetary punch will effectively rein in inflation while allowing the economy to chug ahead at a slower but more sustainable rate. Or maybe it will be too effective, and trigger a recession or stagflation (which is when prices continue to surge even though the economy weakens).

A lot depends on whether COVID persists in disrupting supply chains and consumer buying practices, and what happens with oil and other commodity prices, which jumped sharply in February when Russia invaded Ukraine.

And there’s this pivotal question: Do consumers and businesses become convinced that inflation is going to stick around for a long time? If they do, the danger is a wage-price spiral, in which workers seek higher pay to blunt inflation’s impact, businesses raise prices to offset the increasing costs of labor and materials, rinse and repeat.

On Friday, we got more of a sense of what the Fed is up against.

The Labor Department said the April unemployment rate was unchanged from the previous month, at 3.6 percent. That is 0.1 percentage point above the rate in February 2020, immediately before COVID hit. Based on this measure, the job market is extremely tight.

The same report showed that employers added 428,000 jobs, matching March’s payroll gain. The economy has added an average of 552,000 jobs each month over the past year, a phenomenal clip.

But on Tuesday, the government said there were 11.5 million open jobs in March, the most since it began tracking the data in 2000. Many economists see this as evidence of a labor shortage that threatens to drive up wages.


Others are less worried about a wage spiral. Average hourly wages rose 5.5 percent in April over a year earlier, according to Friday’s employment report. That was down from 5.6 percent in March, and some analysts took this slight decline as a sign that wage increases have plateaued.

“Firms are simply posting openings in order to precipitate a large stream of applicants, most of which are disqualified by HR bots,” said Brian Bethune, an economist at Boston College, who sees the chances of a recession as being low.

“The positions simply are never filled, so the existing workforce has to backfill with overtime hours, some of which is paid, which then pushes up average hourly earnings, but most of which remains unpaid,” he said.

Whether the dip in wage growth is a blip or a longer-term trend, unemployment rates at these levels aren’t sustainable without further aggravating inflation. Something has to give, or the Fed will be forced to jack up interest rates even more than it has signaled.

Stock market volatility has risen this year as investors swing between bouts of optimism and pessimism, sometimes during the same trading day.

On Wednesday, following the Fed’s rate announcement, stocks had their best day since 2020. “The Fed has this under control,” investors seemed to be saying.


But the following day prices plunged, in the worst day since 2020. On Friday, stocks trimmed earlier losses on the jobs report, then tumbled before climbing back and ending the day with only modest losses. For the year, the Standard & Poor’s 500 index has lost 13.5 percent while the tech-heavy Nasdaq has shed more than 22 percent.

“I think events of the past week confirm that the economy is strong and close to full employment, and that the Fed is committed to quickly tightening monetary policy sufficiently to slow the economy’s growth and quell inflation,” said Mark Zandi, chief economist at Moody’s Analytics. “But the slide in the stock market suggests that investors worry this will be tough for the Fed to pull off, and risks are uncomfortably high that the Fed will misstep and push the economy into recession.”

Powell & Co. are walking the high wire. I wish they had a net.

Larry Edelman can be reached at larry.edelman@globe.com. Follow him on Twitter @GlobeNewsEd.