Normally one would expect that labor shortages would end up slowing down the US economy. But so far, this hasn’t been the case. The job market expansion in the fourth quarter of 2018 (based on two months of data) has been very strong.

A tight labor market is supposed to act as a check on the economy. But nonfarm payrolls increased by a robust 228,000 jobs in November after adding 244,000 in October.

As of October, the unemployment rate was only 3.7% and payroll jobs were growing at a 1.7% annual rate. Total hours of work expanded even faster, at a nearly 2% annual rate. Moreover, average hourly earnings were up just 2.5% from a year earlier.

Despite the Fed and many private sector economists expecting the wages to heat up, there have been no concerning signs of this occurring.