The Federal Reserve keeping a close eye on today's jobs market report as an indicator of how its interest rate control is affecting the economy -- and whether the Fed should change its direction on rate rises.

The Labor Department's release is indicating a slowing but still robust labor market, as the Fed signals it's set to continue raising rates to fight inflation.

The March jobs figures -- and jobs reports in the future -- are being closely watched by the Fed as a proxy for the economy's health. Fed officials believe strength in the job market contributes to the rise in inflation, both in the sheer number of jobs created and in wage growth.

Yahoo! Finance's Brad Smith and Seana Smith spoke to Jennifer Schonberger about why jobs matter to the Fed. Watch the full interview above. Key video moments:

00:00:22 - "Officials believe the strength in the job market is feeding inflation higher"

00:00:33 - "If jobs growth remains too strong, the Fed will move to push rates higher"

00:00:40 - "The fed looks at inflation in three buckets"

00:01:20 - "Inflation reflects a gap between demand and supply"

00:01:53 - "The Fed has penciled in one more rate hike for its May meeting"

Video Transcript

BRAD SMITH: Also, everyone, the jobs report out this morning showcasing a resilient labor market that isn't slowing as much as the Fed would like to see. Let's take a step back and discuss why the jobs report matters for the Fed. Joining us now to break it all down, Yahoo Finance's own Jennifer Schonberger. Jennifer, floor is yours.

JENNIFER SCHONBERGER: Good morning. Good morning, Brad. The Federal Reserve closely takes into account the jobs report, because officials believe the strength of the job market is feeding inflation higher, both in terms of sheer numbers and wage growth. If jobs growth remains too strong, the Fed will move to push rates higher to try to slow down job growth and bring down inflation.

The Fed looks at inflation in three buckets. One, core goods price inflation, which is the price of things like washing machines. Two, shelter inflation, prices for rents and homes. And three, services inflation excluding shelter.

This is the one that tends to be closely tied to labor costs. It remains particularly elevated and will require wage pressures to ease more. Several officials have noted that wages need to grow at a slower level more consistent with 2% inflation. Certainly, this report underscores that with above 4% wage growth.

Now, inflation reflects a gap between supply and demand, resulting in pressures that fuel wage and price increases. In raising interest rates, the Fed intends to slow demand, cool a still hot job market, and bring demand and supply back into alignment. Stronger than expected jobs reports both in January and February pushed the Fed to move forward with raising rates a quarter percentage point at the March policy meeting, despite the turmoil in the banking sector.

Now, the Fed has penciled in one more rate hike, potentially for that May meeting. That would bring the Fed funds rate to a range of 5% to 5.25% from the current range of 4.75% to 5%. Certainly, the Fed will take into account this jobs report as well as forthcoming information. There's still quite a bit of time between now and their May meeting.

But, Brad, I just want to note, anecdotally, I asked St. Louis Fed President Bullard on a call yesterday about that JOLTS report, which was the latest data that we had coming into this jobs report. And that data, as you know, showed the biggest drop in jobs openings in nearly two years.

And Bullard told me he didn't think that really sent much of a signal yet in terms of more balancing out in supply and demand in the job market. So we'll see how the Fed views this. In your commentary this morning, certainly, the unemployment rate implies that the job market is still quite tight, even though we saw a bit of cooling in the overall headline numbers. Back to you.

SEANA SMITH: All right, Jen, thanks so much. And certainly traders boosting their bets on a rate hike in May.