Full Employment

The increased wage pressure isn’t surprising given the drop in short-term joblessness. Based on that measure, full employment -- the rate at which inflation remains steady -- is about 4.6 percent, the New York Fed economists found. If joblessness is below that level -- as it is now -- worker compensation should pick up as companies are forced to pay higher wages for the employees they want.

Research by Alan Krueger, a professor at Princeton University in New Jersey, and Andreas Mueller of the Columbia Business School in New York shows why the duration of joblessness is important. They found that the amount of time out-of-work Americans devoted to job hunting fell sharply the longer they were unemployed. The results were based on weekly interviews with 6,025 jobless workers in New Jersey in 2009 and 2010.

Few Interviews

Companies also are less inclined to take on the long-term unemployed, according to research by Rand Ghayad, a visiting scholar at the Boston Fed. In 2012, he sent out 4,800 fictional résumés that were identical in all aspects except length of unemployment and industry experience. Those out of work for a long stretch received very few invitations for interviews from prospective employers.

Up to a point, Fed policy makers would probably welcome a rise in wages and inflation, which is below their target, said Hooper, chief economist for Deutsche Bank Securities.

“I don’t think there is any reason” for the Fed to worry now, he said. “Later this year, it’s going to be more of an issue” as the economy strengthens and unemployment falls more.

First « 1 2 3 4 » Next