In towns where workers are scarce, employers are boosting pay and perks and stepping up recruiting—all while trying to avoid raising prices.
What will happen when the U.S. unemployment rate falls below 4 percent, which is expected to occur by this summer? One way to tell is to look at cities where joblessness is already lower than that. Bloomberg News reporters traveled to Iowa, Georgia, and Maine. What they saw there is encouraging. They discovered that employers have found ways to cope with tight labor markets and still make money. Businesses have pulled in workers from the sidelines—including retirees, immigrants, and the homeless—and retooled processes to use less labor. Some have raised pay considerably for certain jobs, but so far there are no signs of an overall wage explosion. That should embolden those at the Federal Reserve who want to raise interest rates slowly to give growth a chance.