The jobs report comes as the Fed considers the timing of rate cuts.

The Federal Reserve is considering when and how much to cut rates, and Friday’s employment report will give policymakers a timely hint at how the economy is shaping up ahead of their next policy meeting.

Fed officials are meeting on March 19 and 20 and are widely expected to leave rates unchanged at that meeting. But investors think they could start cutting rates as early as June, a view that Fed Chairman Jerome H. Powell did little to strongly affirm or undermine during his testimony in Congress this week.

“We are waiting to gain more confidence that inflation is moving sustainably toward 2 percent,” Powell told lawmakers Thursday. “If we gain that confidence, and we are not far from it, it will be appropriate to roll back the level of restriction.”

The Fed is primarily watching progress on inflation as it considers next steps, but is also keeping an eye on the labor market. If job growth is strong and the labor market is so robust that wages rise quickly, that could keep price increases high for longer as companies try to cover their costs. On the other hand, if the labor market starts to slow sharply, that could prompt Fed officials to make earlier rate cuts.

For now, unemployment has remained low and wage growth has been solid, but not as strong as in the US peaks it reached in 2022. That has reassured Fed officials that the supply of workers and demand for new hires will rebalance even without a painful economic slowdown.

“While the gap between jobs and workers has narrowed, demand for labor still exceeds the supply of available workers,” Powell said this week.

If recent progress in rebalancing continues, it could allow the Fed to achieve a so-called “soft landing”: a situation in which the economy cools and inflation moderates, allowing the Fed to withdraw from an aggressive interest rate policy without a recession.