We’ve been talking a lot about the potential for wage growth in the economy lately for a couple reasons.
One is that there’s mounting evidence that wage growth is coming. The labour market is getting tighter, and various leading indicators of wage growth are pointing higher.
The reason it’s important is that wage growth is the one thing that could get markets nervous about a rate hike.
Anyway, the latest evidence of a tightening labour market comes from the temp industry.
Though many temp workers would like full-time jobs with benefits, at least their pay is climbing. Robert Half International, a staffing firm, says higher pay for its temps forced it to raise the rates it charges employers by 2.6 per cent in the first quarter, a point higher than its increase late last year.
When a temp firm is forced to increase the rate it charges clients, it’s hard to interpret this as anything other than a dwindling pool of surplus labour.
On that note, chart sent out this morning by Torsten Slok tells the same story, but from a different manner.
The chart shows the number of unemployed and people who aren’t in the labour force but want a job relative to the number of jobs currently available.
As you can see, we’re getting very close to the pre-crisis average.