Long Term Perspective

When the economy is operating at full throttle, a falling unemployment rate frightens policy-makers as they anticipate that rapidly rising wages will turn into runaway inflation. In fact, wage growth did begin to accelerate in 1995, and peaked in 1998.

Short Term Perspective

Wage growth remained in a tight 3.4 to 3.8 percent range until November when it shot up to 4 percent on a year over year basis. It remains below 1998 highs, but could cause concerns among Fed policymakers. The jobless rate inched up to 4.0 percent in November.