The Federal Reserve and everybody else following the economy have been desperately looking for signs the economy is cooling. Finally, it is.

Employers added 236,000 jobs in March, which is a solid monthly improvement—but it’s also the smallest gain in 27 months. There’s now a solid trend in place showing moderation in the job market after two years of COVID-related distortions and a seemingly unquenchable need for workers.

Earnings are up 4.2% from a year ago, which is also decent—yet that trend is declining, too. A year ago, earnings were growing at a 5.9% annual rate, which raised concerns about a wage-price spiral in which higher labor costs push prices up and lock in inflation. But that doesn’t seem to be happening, either.

This is exactly what the Fed wants to see, and President Biden probably likes it, too. The Fed has been aggressively hiking interest rates to bring inflation down, and one sign that is working is cooling demand for labor. That’s what we’re seeing. Inflation peaked at 9% last June, and it’s now down to 6%. The Fed wants inflation below 3%, and decelerating job growth suggests that’s where it is heading.

There are other signs of a slowdown that should further reassure the Fed. A separate report showed that job openings dropped to 9.9 million in February, which, again, is elevated, but 17% below the peak from last spring. A historically low level of applications for unemployment insurance has been ticking upward since January. A service-sector report shows a slowdown there, too. That’s important because goods inflation is back to normal, but services inflation is still too high. A slowdown in service activity should bring that inflation down.

Two important trends are emerging. First, the Fed is either done hiking interest rates or nearly done. It has raised short-term rates by 4.75 percentage points since last March, including a quarter-point hike on March 22 that some policymakers thought was excessive. If the consumer-price report on April 12 shows a further dip in the inflation rate, as expected, the Fed may have all the top cover it needs to shift into neutral. Even if it doesn’t, future rate hikes will be minimal.