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Does Ultra-Low Unemployment Spur Rapid Wage Growth?

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Abstract

The unemployment rate ended 2018 at just under 4%, substantially lower than most estimates of the natural rate. Could such an ostensibly tight labor market lead to a sharp pickup in wage growth from its recent moderate pace, such that the relationship between wage growth and unemployment is not always linear? Investigations using state-level data show no economically significant nonlinearity between wage growth and unemployment that would predict an abrupt jump in wage growth.

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  • Sylvain Leduc & Chitra Marti & Daniel J. Wilson, 2019. "Does Ultra-Low Unemployment Spur Rapid Wage Growth?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00182
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    1. Nicolas Petrosky‐Nadeau & Lu Zhang, 2017. "Solving the Diamond–Mortensen–Pissarides model accurately," Quantitative Economics, Econometric Society, vol. 8(2), pages 611-650, July.
    2. Kumar, Anil & M. Orrenius, Pia, 2016. "A closer look at the Phillips curve using state-level data," Journal of Macroeconomics, Elsevier, vol. 47(PA), pages 84-102.
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    1. Hall, Robert E. & Kudlyak, Marianna, 2025. "The active role of the natural rate of unemployment," Research in Economics, Elsevier, vol. 79(4).
    2. Hooper, Peter & Mishkin, Frederic S. & Sufi, Amir, 2020. "Prospects for inflation in a high pressure economy: Is the Phillips curve dead or is it just hibernating?," Research in Economics, Elsevier, vol. 74(1), pages 26-62.
    3. Smith, Simon & Timmermann, Allan & Wright, Jonathan, 2023. "Breaks in the Phillips Curve: Evidence from Panel Data," CEPR Discussion Papers 18033, Centre for Economic Policy Research.
    4. James Bishop & Emma Greenland, 2021. "Is the Phillips Curve Still a Curve? Evidence from the Regions," RBA Research Discussion Papers rdp2021-09, Reserve Bank of Australia.

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