Almost every indicator suggests that US labour market conditions are the tightest they have been since the financial crisis, possibly even the tightest in decades. Nearly every sector is now operating with very little spare capacity. What’s more, surveys raise the possibility that the headline unemployment rate could fall below 4% by the end of the year, a level seen in only six months since 1970, or about 1% of the time.
With the labour market now back to pre-crisis rates of unemployment, any further reductions are likely to put upward pressure on wage growth. The latest surveys suggest that, after stagnating over the past year or so, average hourly earnings growth will pick up from 2.5% in April to over 3.0% by the end of the year.
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