There are hundreds of extraordinarily diverse labor markets in the U.S. economy, and it takes a much more granulated approach to make any sense of this highly fragmented and dynamic marketplace.

Conventional economists/media pundits typically view the labor market as monolithic, i.e. as one unified market. The reality is the labor market is highly fragmented. Thus it’s little wonder that conventional measures are giving mixed signals on employment, wage inflation, etc.

Here is a typical chart of the labor market: the annual rate of change in hourly earnings, going back to the late 1960s. I’ve annotated the chart to show that hourly earning rose sharply in the inflationary 1970s, but since then have only popped higher in asset bubbles–the dot-com era and the housing bubble:

Gneralized measures that lump all wage earners together give us a snapshot of trends, but they fail to describe the realities of today’s labor markets. The reality is much more complex, and thus beyond the outdated conventions that divide the labor force into broad sectors:

1. While most workers are receiving little in the way of wage increases, employers’ total compensation costs are soaring due to skyrocketing healthcare premiums and other labor-overhead costs such as workers compensation.

Economists puzzled by the lack of wage inflation in an era of “full employment” should look at total compensation costs instead of wages: the inflation is in the labor-overhead costs, not employee compensation.

2. Regions dominated by a handful of employers do not offer many opportunities for employees to jump to other employers for higher pay. This lack of competition enables dominant employers to suppress wage growth.

3. Scarcities of skills and experience that drive wages higher tend to be sector-specific and are often localized. Across the broad spectrum of basic skills and experience (for example, white-collar work performed by employees with non-technical college diplomas), there are few scarcities that could push wages higher.