Debating the Outlook for U.S. Workers

Bloomberg contributors Conor Sen and Karl W. Smith have very different views on the state of the U.S. labor market. In a Feb. 22 article, Sen found signs that companies such as Campbell’s Soup are struggling to contain wage inflation, among other costs. Smith doesn’t buy the premise that the economy is running hot enough to generate adequate pay raises and exhaust the supply of workers. Here is an edited version of their email discussion.

Karl Smith: Conor, you’ve pushed pretty hard the view that demand for workers in the U.S. has started to outstrip supply — that the economy may have reached or even exceeded its capacity. If I’m reading you right, you think this will lead to lower profits, increased businesses bankruptcies and more job-switching. What then do you make of several facts: persistently low inflation, very low layoff rates, and wage growth that some economists say is consistent with only mediocre employment levels?