White House economic officials came in a year ago with a singular focus: returning the U.S. labor market to pre-pandemic health as quickly as possible. That effort has gone better than nearly anyone expected. A flood of federal aid to businesses and households, coupled with widespread vaccine availability, led to a surge in economic activity in 2021 that propelled hiring and pushed down the jobless rate. Now, growing worries over inflation — spurred by supply-chain disruptions and strong demand — could prompt the Federal Reserve to begin winding down the party just as it’s getting good for some workers. As the Fed eyes interest-rate increases this year, Democratic lawmakers could try to pressure Fed Chair Jerome Powell to hold off until the economy reaches maximum employment and grill him on what conditions he thinks would warrant a rate increase. They’ll soon have their chance: The Senate Banking Committee plans to hold two confirmation hearings next week to consider Powell’s renomination and the selection of Governor Lael Brainard to be vice chair, according to a person familiar with the matter who wasn't authorized to speak publicly about the hearing schedule. A bright spot: With widespread angst over inflation, it’s easy to forget that the labor market — while not quite back to its pre-pandemic state — has been a bright spot for the economy and on the Biden administration’s recovery scorecard. Just how solidly the market has rebounded will become even more clear this week with new reports due on job openings, turnover and hiring. About this time last year, the Congressional Budget Office projected the jobless rate would fall to 5.3 percent by the end of 2021, in line with private forecasters. By November, the rate was down to 4.2 percent, a full three years sooner than CBO expected. Employers added an average of 555,000 jobs a month through November. That brought total payrolls up to 148.6 million — 1.4 million more than private economists projected for the fourth quarter, according to a February 2021 survey by the Federal Reserve Bank of Philadelphia. “Growth in the labor market and the recovery that we’ve seen so far has objectively been very strong and beat all the expectations that people had at the beginning of last year,” said Nick Bunker, an economist at the hiring website Indeed.com. That has translated into important gains for workers. The gap between employment rates for white and Black employees has narrowed, wages are rising at their fastest pace in years, especially for workers at the bottom of the wage scale, and the rate of employees quitting jobs remains near a record high, suggesting workers are confident they can find better positions. Where does that leave us for 2022? Powell said at a press conference last month that the economy “has been making rapid progress toward maximum employment.” But he’s been vague about what that threshold will look like, admitting it’s a judgment call that will depend on a range of factors, including the jobless rate, labor-force participation, job openings, wages and flows in and out of the labor force. While labor-force participation has shown signs of improvement, especially among women, Powell emphasized it may take some time before participation returns to its pre-pandemic rate. At the same time, brisk wage increases have caught the Fed’s attention. While wage growth hasn’t been a major contributor to elevated inflation, Powell said, he was concerned enough about an Oct. 29 report on compensation to briefly consider whether officials should pull back their support for the economy more quickly. Bunker estimates the employment-to-population ratio for prime-age workers could return to February 2020 levels by May or June. But will the Fed judge that to be maximum employment? Bunker said it’s not clear the two are the same. “Just because things are quite good doesn’t mean we can’t get better,” he said. IT’S TUESDAY — Today’s Tweet of the Day comes from USA Today columnist (and wife of Sen. Sherrod Brown) Connie Schultz: “I am watching #Succession with the chairman of the Senate banking committee and holy cannoli the ongoing commentary.” Oh, to be a fly on the wall. Do you love Succession? Should your MM host start watching? Hit us with your best TV recs (and hot tips) at kdavidson@politico.com or aweaver@politico.com, or on Twitter at @katedavidson and @aubreeeweaver. | 
