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To hire 10 to 15 project coordinators this year, Texas builder Sabre Commercial has boosted pay 10 percent and added a 401(k) retirement plan. “It is an employee’s market,” says John Cyrier, co-founder and president of the 48-employee Austin-based company. “We are definitely seeing a labor shortage in Austin and central Texas. I see it only getting worse.”

Companies in cities across the U.S. are struggling to fill positions, with jobless rates in some metropolitan areas below the 5.2 percent to 5.6 percent level the Federal Reserve regards as full employment nationally. Competition for workers is prompting businesses to raise wages, increase hours for current employees, add benefits, and recruit from other regions.

“There are spot labor shortages” that probably will “broaden out over the next year as the job market steadily improves,” says Mark Zandi, chief economist at Moody’s Analytics (MCO). Unemployment in the metropolitan area of Austin-Round Rock-San Marcos was 4.8 percent in February, Department of Labor figures show. Forty-nine of the country’s 372 metro areas, or 13 percent, reported jobless rates below 5 percent that month, the most for February since 2008, two months after the start of the recession. The lowest was 2.8 percent in Houma-Bayou Cane-Thibodaux, La., because of offshore oil exploration in the Gulf of Mexico.

STORY: With Fewer Workers Getting Fired, the U.S. Labor Market Tightens
Four years ago, during the worst of the labor market slump, only two cities—Iowa City, Iowa, and Lincoln, Neb.—had jobless rates below 5 percent. “That says the economy is getting better in a lot of places,” says David Wiczer, labor market economist at the Federal Reserve Bank of St. Louis. Although national unemployment is a closely watched indicator, “it is difficult to average things. This does have implications for wage pressure at the local level.”

The latest Fed Beige Book review of regional economic conditions highlights the pinch, with 6 of the 12 Federal Reserve districts—Chicago; Cleveland; Dallas; Kansas City, Mo.; New York; and Richmond, Va.—reporting that companies were struggling to find skilled workers in March and early April. “There were several reports of upward wage pressures” in the Dallas district, which includes Austin, according to the Beige Book. “Construction-related manufacturers said they had to pay truck drivers more, and an oilfield services firm noted definite wage increases.” Pressure also “continued to be reported in petroleum refining, both in construction-type jobs and factory personnel. Two other manufacturers said they intend to give small raises in the near future,” wrote the authors of the Beige Book.

Compensation has risen about 2 percent nationally so far this year and probably will increase 2.2 percent next year, and wages in 2016 will probably rise 2.5 percent, Zandi estimates. “The national economy will return to full employment one metro area at a time,” he says. As incomes edge higher and labor markets tighten, the Fed may raise its benchmark interest rate more than policymakers have projected, says Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities (DB).

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The number of positions open nationally climbed by 299,000, to 4.17 million in February, the most since January 2008, the Labor Department reported in early April. In New Orleans, where unemployment is 4.2 percent, “we are getting killed on overtime,” says restaurateur Ti Martin, co-owner of Commander’s Palace, SoBou, and Café Adelaide, which employ a total of more than 350 people. “We are doubling up and working extra hours,” and managers are filling in as cooks. The restaurants have a dozen or more openings, mainly for experienced chefs and servers, she says. Martin is leading an effort to start a nonprofit culinary institute in the city to train kitchen staff. In Omaha, with a 4.5 percent unemployment rate, the Greater Omaha Chamber of Commerce is helping member companies increase the number of internships to more than 300 this year, from 135 in 2012, at such employers as Mutual of Omaha Life Insurance, Union Pacific (UNP), and ConAgra Foods (CAG).

STORY: More Jobs, Less Pay
The bottom line: With some labor markets returning to normal, wage increases are all but guaranteed.
Matthews is a reporter for Bloomberg News in Atlanta.

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