This is a very good article that was written before
yesterday's hike in the Fed funds rate. It is full of
good statistics on the labor market. The key
question being asked: Is job growth slowing because
businesses are not hiring, or because they cannot
find qualified people to hire?
The distinction is critical. If slower demand is causing
businesses to scale back their need for labor, then
wage pressures cannot take hold. If, instead, jobs
are not rising because there are too few workers to
fill them, then businesses will start to raise wages to
attract qualified people.
And unless those fatter paychecks are met with
greater productivity, the wage acceleration will be
inflationary.
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