Responsible economists are wary of anecdotal evidence, careful to leave what happens in their daily lives out their interpretation of the real economy. That your father's plant was shut down does not augur higher unemployment across the nation. That the rent on your sister's New York apartment is stratospheric does not mean real estate is out of control.
And thank goodness economists are mindful of this danger. Particularly the economists who sit on the
Federal Open Market Committee
. Because if they based monetary policy on things like the email that flooded into
after we asked readers to comment on what kind of pressures there are in local labor markets, the folks at the
would be cutting their vacations short and meeting to raise rates now.
We already know that the job market is tight -- with the unemployment rate sitting at 4.3%, there's no denying that -- but what economists have been struggling to figure out is, at what point does that tight labor market begin to force wages too high, too quickly?
The mail suggests that that point may have been reached. Readers wrote of for-hire signs hanging in front of storefronts everywhere, burgeoning help-wanted sections in local papers, offers of signing bonuses for fast-food workers. "I overheard a couple of
workers the other day talking about job opportunities around town," went a typical letter. "One of them said a hamburger chain was paying $9 an hour to start. In Austin, nobody works for minimum wage."
Employers wrote of the difficulties they're having attracting and retaining workers. A manager of a blue-collar company operating in Florida and Georgia talked of how it had to raise hourly wages early this year to deal with a staffing shortage. A business owner in southeastern Pennsylvania said that every time he finds an employee worth hiring, "I worry about whether or not that person will bring a high enough return on investment." And a Chicago futures firm worker wrote: "We have lost a significant number of people due to higher wages elsewhere, and have had to respond by boosting wages and bonuses for current employees and those we try to hire."
Some readers wrote of how higher employment costs are limiting business expansion plans -- and how they are seeking to increase business by boosting productivity.
"This problem has caused us to sell other businesses and curtailed further expansion ideas," wrote one Tampa, Fla.-area pharmacy and medical equipment business owner. "We are looking for quicker, simpler ways of making money that do not require experienced help."
Wrote a sales manager at a high-end retailer combating a tight labor market in Lancaster, Pa.: "The fewer employees has forced us to hire better people, pay them higher wages and work them like dogs. While things are tight in the labor market here, it is not anything that can't be solved by greater output per worker. We are consistently finding ways to increase our productivity and each time we do the labor problem gets a little less severe."
But while most of the email pointed to white-hot job market, some did not. A reader in Maine pointed of how tough things are in a state that remains heavily dependent on commodity-based businesses. Hawaii, with an economy as closely linked to Japan's as to the mainland's, continues to suffer from a soft labor market.
And before concluding that wage inflation is about to go through the roof, consider where a lot of the letters came from: Silicon Valley, Dallas and Austin, the Twin Cities, Atlanta. An outsized share of respondents came from some of the real hotspots of the American economy.
"The anecdote is a pretty weak read on which to hang any respectable analysis,"
Morgan Stanley Dean Witter
U.S. economist Richard Berner warns readers who would jump to economic conclusions based on these letters.
Yet while what's in these letters may have overstated the magnitude of a tight labor market, it also seems that, at least directionally, they're right.
"It's very, very dangerous to extrapolate economic conditions from one spot in the country," says Suzanne Rizzo, U.S. economist at
. But when that evidence is broad-based, and when there are data that support it, then it's worth paying at least some attention to. Then it can help give the numbers form.
"The thing anecdotal evidence does give you," says Rizzo, "is color to interpret the data."
Read the Comments
Click on the links below to check out what readers around the country had to say:
Northwest and Mountains