US workforce shortages bolster case for Fed rate hikes

LINCOLNSHIRE: HydraForce Inc is going to almost desperate lengths, including offering to bus in out-of-town workers, to find the muscle it needs to meet growing demand for hydraulic valves from its three factories north of Chicago.

The Lincolnshire, Illinoisbased firm, which wants to add 125 employees to its workforce of 850 this year, has six job fairs planned this month and next and is offering a ‘ wheels- to- work’ programme for workers without cars.

Even higher wages – the company raised salaries last July and is planning to do so again early this year – have not enticed enough would-be workers, said Robyn Safron, HydraForce’s human resources manager.

“A couple of years ago we felt like our walk-in traffic was sufficient,” she said in an interview. These days, she added, “I lay awake at night trying to think of things to do” to attract staff.

HydraForce’s story is an increasingly common one that backs up a broad range of economic data showing a tightening of the job market even in states like Illinois where unemployment, at 4.9 per cent, exceeds the 4.1 per cent national average.

That is making even some centrist policymakers at the Federal Reserve worried that the labour market could get too hot, tipping wage growth and inflation, stuck at low levels since the 2007 to 2009 recession, into high gear.

So far, wage increases have stayed just ahead of inflation, which in turn has languished below the US central bank’s two per cent target even with unemployment running for nearly a year below levels most economists think are sustainable.

With the jobless rate at a 17year low, shortages of workers have become more apparent and upward pressure on wages is likely to grow, Dallas Fed President Robert Kaplan said on Wednesday after an event in Palm Beach, Florida.

That means financial markets, which currently are pricing in three rate hikes by the end of this year, may need to brace for a possibly more aggressive path. — Reuters