The Most Interesting News in the Jobs Report Isn’t About Jobs

But how’s the pay?

Photo by Joe Raedle/Getty Images

The U.S. added 214,000 jobs in October, slightly below analysts’ expectations, while unemployment fell to a six-year low of 5.8 percent. We’ve now tacked on at least 200,000 jobs each month for nine straight months. The economy is locked into a pattern of healthy, if not torrid, employment growth that probably would feel more exciting if we weren’t still digging ourselves out of the hole created by the recession.

Because it’s been so consistent, the monthly jobs number isn’t really the most interesting part of the jobs report any longer. Rather, the figure that economists are now keeping their eye on—especially Federal Reserve economists—is wage growth. Why? Because that will tell us whether the labor market is getting “tight,” meaning that companies are having enough of a hard time hiring employees that workers can actually bargain for higher pay.

Now, many of us might consider higher pay a good thing. But if workers can bargain for raises, that could theoretically lead to inflation, which some economists fear like Twisty the Clown. You can argue whether or not that’s rational (I’d say not), but if wage growth does start to pick up speed, there’s a good chance the Federal Reserve will hike interest rates to slow it down.

As of now, wages are up just two percent year over year, which is basically stagnant. But some, like Moody’s Analytics economist Mark Zandi, are convinced wage spikes are just around the corner. Even though the overall unemployment rate is still high by long-term standards, some analysts believe that the millions of the long-term jobless are essentially unhireable—meaning that employers are actually looking at a much smaller labor pool. The short-term unemployment rate is already almost back to normal, and to them, that indicates pay raises are on the way. If they are, we can only hope that the Fed doesn’t overreact and throw cold water on the economy before it ever really gets hot.