Interesting question. I think a soft landing would require both price levels and the labor market to be in equilibrium by the time the Fed is done, without the economy going through a hard recession. (A mild one will still qualify as a soft landing, I think.)
Unfortunately, a prolonged tight labor market moves things in the wrong direction by triggering a wage-price spiral. Because there are fewer people available to work than positions, it is an employee’s market where they can demand higher wages. Companies will pay those higher wages because they need the people. The people will then go and spend this money in the real economy, which will drive up prices. Assuming it’s still relatively the same about of stuff out there; GDP is relatively flat, so we can sort of assume this. (There’s a BIS paper linked in a prior post that might be of interest.)
There are two ways in which a heated labor market cools. Demand for labor is reduced, or supply of labor is increased. Since we’re unlikely to get more foreign workers, that leaves destruction of demand for labor, which in turn means companies need to get hurt. (A third is increasing productivity of the labor force, but that needs a long time too.)
How much hurt are we talking about? The US has about 165M people in the labor force. Say we need to get job openings down to 5M (pre free-money numbers…), and unemployment needs to go up by another 1% (1.65M), as per Fed models for balance - that means the economy needs to lose 6.65M worth of jobs.
That’s a full 4% reduction in positions businesses are telling us they have. This level of employment reduction has only happened at times of extreme distress - the GFC and COVID in recent times.
And to make matters worse, we’re going in the wrong direction. Job openings are up. Unemployment is down just a smidge. Even more people were hired recently.
All in, a soft landing thus seems unlikely because: a) a tight labor market triggers the wage-price spiral, and b) the market is only getting tighter, for now.