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. A rising jobless rate often alleviated wage pressures but is typically associated with economic recession. Federal Reserve policymakers aim for balanced growth with virtually no inflation.

Short Term Perspective
The unemployment rate jumped to 6 percent in November. It remains in its at the high end of its range of the past several months. Labor market conditions haven't changed much these past two quarters. Hourly earnings are moderating; this bodes well since it suggests that inflationary pressures are not in the pipeline.