>At any rate, I don't believe the US unemployment rate measures the
>tightness of the labor market in which US capital operates. There are not
>only the numerous invisible discouraged American and uncounted migrant
>workers on whom US capital can call, there is now a massive surplus global
>labor supply that has become available due to decreasing transportation
>costs, the capability of building skills into transportable machines (see
>MR Raghavan, The Technological Transformation of the Third World) and
>improved telecommunications.
That international labor supply doesn't do much good for employers in service industries. The business press is full of reports of labor shortages in construction and retail. (Yes they can use immigrants, but only up to a point.) Sure enough, real wages are pretty flat in U.S. manufacturing, but the service sector has seen some not insignificant real wage increases over the last two years.
Here's aother excerpt from Greenspan's May 6 speech in Chicago. He's been saying this sort of thing for a year or more:
"Although productivity has accelerated in recent years, the impressive strength of domestic demand, in part driven by sharply rising equity prices, has meant that the substitution of capital for labor has been inadequate to prevent us from steadily depleting the pool of available workers.
This worker depletion constitutes a critical upside risk to the inflation outlook because it presumably cannot continue without eventually putting increasing pressure on labor markets and on costs.
The number of people willing to work can be usefully defined as the unemployed component of the labor force plus those not actively seeking work, and thus not counted in the labor force, but who nonetheless say they would like a job if they could get one. This pool of potential workers aged sixteen to sixty-four currently numbers about 10 million, or just 5-3/4 percent of the corresponding population. This is the lowest such percentage on record--which begins in 1970--and is 2-1/2 percentage points below its average over that period.
The rapid increase in aggregate demand has generated growth of employment in excess of the growth in population, causing the number of potential workers to fall since the mid-1990s at a rate of a bit under one million annually. We cannot judge with precision how far this level can decline without sparking upward pressures on wages and prices. Accelerating productivity may have appeared to break the link between labor market conditions and wage gains in recent years, but it cannot have changed the law of supply and demand.
At some point, labor market conditions can become so tight that the rise in nominal wages will start increasingly outpacing the gains in labor productivity, and prices inevitably will then eventually begin to accelerate."
Doug