Unemployment Low in Many Markets - Maybe the Grass is Greener?

It looks like the economy is starting to get moving again as select areas begin to experience labor shortages. In an article titled, "Tight Job Market in U.S. Cities Prompts Higher Pay", - a title that's impossible to say out loud without inexplicably adding a verbal question mark at the end - Bloomberg notes forty-nine metro areas are experiencing unemployment rates below 5%.

“It is an employee’s market,” said John Cyrier, co-founder and president of the 48-employee Austin, Texas-based builder. “We are definitely seeing a labor shortage in Austin and central Texas. I see it only getting worse.”

Companies across the U.S. from Texas to Virginia and Nebraska are struggling to fill positions with metropolitan jobless rates 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.

It's tough to say that this isn't a positive sign, unless you're dependent on the Fed providing a high degree of accommodation. While the Fed scrapped their peg to the 6.5% unemployment for their main interest rate, continuing improvement points to increases in the federal funds rate sooner rather than later.

As incomes edge higher and labor markets tighten, the Fed may raise its benchmark interest rate more than policy makers have projected, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York and the top unemployment forecaster for the past two years, according to data compiled by Bloomberg.

The FOMC has held its federal funds rate on overnight loans among banks near zero since December 2008 and has predicted the rate will be 1 percent at the end of 2015 and 2.25 percent at year-end 2016. LaVorgna estimates it will be 1.5 percent in December 2015 and 3.5 percent a year later.

So, this begs the question, what is the Fed going to do going forward? In a separate Bloomberg piece, Yellen reiterates her commitment to accommodation:

In a speech that outlined the disciplined policy framework she uses, Yellen told investors to pay attention to shortfalls in both inflation and the jobless rate for signals on the Federal Open Market Committee’s decisions on the policy rate.

“The larger the shortfall of employment or inflation from their respective objectives, and the slower the projected progress toward those objectives, the longer the current target range for the federal funds rate is likely to be maintained,” Yellen said in a speech in New York.

“This approach underscores the continuing commitment of the FOMC to maintain the appropriate degree of accommodation to support the recovery,” she said.

Yellen, in her third month as Fed Chair, is encouraging investors to look at the flow of economic data to judge when the benchmark interest rate is likely to rise above zero after the Fed dropped a link to a specific level of unemployment. At the same time, she indicated that the economy needs continued support from the central bank.

It seems safe to say that accommodation via the federal funds rate will continue which, seems like good news for many banks who are able to take advantage of it. This provides a rather interesting opportunity, areas with high job demands and an accommodative central bank should be good for financiers who are willing to relocate. Bloomberg has a great infographic that shows you the tightest job markets. They're not huge banking/finance hubs like NYC, but many are probably primed to build up their own financial sectors.

What do you monkeys think? See any cities worth heading to?