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 An unpublished paper prepared by his staff showed "declines in the
unemployment rate below 6.1 percent exert significantly higher wage
pressures than if the rate is above 6.1 percent," Fisher told
Reuters in an interview Friday.
Fisher said he had his staff analyze state-by-state unemployment and
wage data from 1982 to 2013 to try to figure out why wage inflation
is emerging in Texas but not elsewhere in the nation.
The results, he said he told his colleagues, are "noteworthy and
need to be thought through."
The U.S. unemployment rate in August was 6.1 percent, exactly the
point below which his staff's research showed wages could start to
take off.
"The number just happened to be 6.1 percent - it is what shook out
of the data," Fisher said.
The Federal Reserve, which has kept short-term interest rates near
zero since December 2008, is expected to begin to tighten policy
next year. The precise timing will depend heavily on its assessment
of the labor market, which the Fed this week said continues to fall
short.
"There are still too many people who want jobs but cannot find them,
too many who are working part time but would prefer full-time work,
and too many who are not searching for a job but would be if the
labor market were stronger," Fed Chair Janet Yellen said.
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Strong job growth in Texas has brought the unemployment rate there
down to 5.1 percent. The Dallas Fed estimates current Texas wage
inflation at about 3.5 percent, higher than the estimated state-wide
inflation rate of 2.5 percent, he said.
The Fed targets a U.S. inflation rate of 2.0 percent.
Fisher said on Friday he worries that further declines in
unemployment nationally could lead to broader wage inflation. To
head that off, and also to address what he called rising excesses in
financial markets, Fisher said he prefers to raise rates by
springtime, sooner than many investors currently anticipate.
"I’d like to do it in a slow and gradual way, rather than rapid and
sharp," he said. "Historically within the Fed, whenever we’ve waited
til we believe we are at some measure of full capacity utilization
and then we’ve raised rates, every time we’ve done it we’ve brought
about a recession."
(Reporting by Ann Saphir; Editing by Andrea Ricci)
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