“It could be that slack in labor markets is much less than assumed,” he told a meeting in New York. “I currently see this as a risk to the inflation outlook.”
New York Fed economists M. Henry Linder, Richard Peach and Robert Rich also highlighted the importance of short-duration unemployment in a Feb. 12 note, concluding that it has done “a better job” tracking changes in worker compensation than the overall jobless rate. Their boss, New York Fed President William C. Dudley, though, played down their results, saying the research was “probably a little bit too black and white.”
“I still think there is a significant amount of slack,” he said on March 6 at an event in New York. “You can see it in the fact that the compensation trends are so subdued.”
That may be changing. Average hourly earnings for production and non-supervisory employees rose 2.5 percent in February from a year earlier, the biggest increase since October 2010, according to the Labor Department.
“Companies are starting to realize that to get good people, to prevent turnover they have to pay a decent wage,” Richard Trumka, president of the AFL-CIO federation of 56 unions, told a Bloomberg Government breakfast on March 11.
Boosting Salaries
Jeff Joerres, chief executive officer of Milwaukee-based staffing firm ManpowerGroup, has been advising some clients for more than two years to raise salaries in order to attract better talent. Only in the last nine months has the suggestion turned into a conversation, he said.
“Some markets are starting to tighten up,” Joerres said.
In the Chicago area, the salaries of mid-level jobs are inching up, said Tom Gimbel, chief executive officer of staffing firm LaSalle Network Inc. He’s telling companies to raise wages now so as not to lose workers as the economy improves.
“It’s become a little bit more of an employee market,” Gimbel said. “You want to retain them in advance so they don’t start to look when the phones start ringing.”