Bloomberg (06/15/15) Rich Miller

U.S. Federal Reserve officials face the challenge of determining who is correct about the state of the job market: economists or staffing firm executives dealing with companies on Main Street. Citing growing wage pressures, some economists make the case that the U.S. economy has returned to full employment, with little or no slack. Staffing executives, meanwhile, say the reality is more complicated than the numbers suggest. They say the improving job outlook will bring more people into the labor market, preventing wages from rising too quickly.

If the economists are correct, the Fed runs the risk of sparking unwanted inflation the longer it waits to raise interest rates. But if staffing firms are correct, the Fed can afford to wait. Making the call isn’t easy, because labor market improvements aren’t uniform. The increase in wages partially is being driven by competition for job applicants with specialized skills. However, there are millions of people with outmoded job skills stuck in part-time work or on the sidelines.

There certainly is “a war for talent,” says Paul McDonald, a senior executive director at Robert Half International Inc., which has led in some cases to wage increases of 10% to 20%. However, the demand for employees is “not across the board. It’s still a specialist market.” Jeffrey Joerres, executive chairman of ManpowerGroup Inc., says that while wages are starting to increase, companies are wary of the economic outlook, so he doesn’t expect a surge in salaries.