Falling Unemployment Rate Isn’t Boosting Wage Inflation (excerpt)

I am inclined to believe that the unemployment rate remains a relatively accurate measure of the labor market. It continues to be very highly correlated with the jobs-hard-to-get series in the monthly Survey of Consumer Confidence. If the labor market has gotten tighter as suggested by the unemployment rate, why aren’t wages rising at a faster rate? During Q1-2014, the Employment Cost Index showed wages and salaries up just 1.7% y/y. Average hourly earnings for all workers increased just 1.9% y/y during April. I believe that employers won’t respond to tightening labor markets by bidding up wages. Instead, they will use technology, when possible, to keep a lid on their labor costs.

Today's Morning Briefing: Field of Dreams. (1) A nonpartisan question. (2) Conservatives and liberals split on extended unemployment benefits. (3) Termination of such benefits may be boosting employment and reducing unemployment. (4) Not much chill in winter employment. (5) Earned Income Proxy at yet another record high. (6) Incentives not to work. (7) Lots of dropouts. (8) Are baby boomers hogging jobs? (9) Yellen’s Dashboard still showing distress in labor market. (10) Wage inflation subdued despite low short-term jobless rate. (11) Focus on market-weight-rated S&P 500 auto-related industries. (More for subscribers.)