Must-read: Jeffrey Sparshott: “Where the Jobless Rate Is 2.3%, Here’s What Happened to Wages”

Must-Read: Jeffrey Sparshott: Where the Jobless Rate Is 2.3%, Here’s What Happened to Wages: “In Lincoln, Neb., average hourly earnings were stagnant until the unemployment rate crossed below 2.5% in the fall of 2014…

…Then, wages took off. Since last October, they gained as much as 10.9% from a  year earlier. The jobless rate in October: 2.3%…. ‘I continue to judge that there remains slack in the economy, margins of slack that are not reflected in the standard unemployment rate, and in particular I’ve pointed to the depressed level of labor-force participation, and also the somewhat abnormally high level of part-time employment,’ Federal Reserve Chairwoman Janet Yellen said this week…

Fed officials’ median projection for the normal long-run unemployment rate was 4.9% as of December. But economists don’t agree on a specific number, or even whether the economy has already reached full employment. In October and November, the unemployment rate was 5% and wages showed signs of firming…. ‘While most indicators have been trending in the right direction, nominal wage growth and the prime-age employment-to-population ratio remain far outside of target ranges, and provide ample evidence that the economy has a way to go before reaching full employment,’ said Elise Gould, an economist at the left-leaning Economic Policy Institute….

Private-sector wages across Nebraska have been growing faster than the national average. The state bumped its minimum wage to $8 an hour from $7.25 at the start of 2015 and will raise it to $9 at the start of 2016, but many firms are moving beyond that. One of the state’s biggest private employers, Bryan Health, in November moved its starting minimum wage to $11 an hour from $8.45….

But to highlight the fine line between apparent full employment and signs of slack, one only need look as far as Omaha. The larger city is only about an hour away from Lincoln and, with the unemployment rate at 2.9%, many companies there also worry about finding enough workers. But wages haven’t taken off. Indeed, for the first time on record, average hourly earnings in the Lincoln metro area surpassed those of Omaha earlier this year.