Finance & economics
The jobs boom: Too much of a good thing
Are labour markets in the rich world too tight?
Last month Jerome Powell, the chairman of the Federal Reserve, identified the most uncomfortable trade-off in economics.
“Today’s labour market”, he said at a press conference, is “tight to an unhealthy level”. In most places and at most times a fall in unemployment, or a rise in the number of people in work, is welcome.
But labour markets can become too strained, creating worker shortages that stop production and cause wages to spiral, which can feed into overall inflation.
Mr Powell fears that America has crossed the threshold from good-tight to bad-tight, one reason why the Fed is signalling that higher interest rates are on the way. Increasingly, though, labour markets elsewhere in the rich world are also straining at the seams.
Almost nobody saw this coming. When the pandemic struck in 2020, most economists believed that the rich world was in for a long spell of high unemployment, similar to what happened after the financial crisis of 2007-09.
In April 2020 America’s unemployment rate hit 14.7%. Had joblessness declined at its post-financial-crisis pace, the unemployment rate in March this year would have been over 13%.
In fact, it is 3.6%. And America, by many standards, is a laggard. A rise in the number of Americans who have decided they do not want to work at all, and who therefore do not count as unemployed, means that the share of 15-to-64-year-olds with a job is slightly below its level at the end of 2019.
In one-third of rich countries, however, this share is at an all-time high. Even among the other two-thirds, which includes America, the median shortfall in the employment rate is just one percentage point. It adds up to the quickest and broadest-based jobs boom in history.
Canada and Germany are among the countries with record employment rates. The same is true of France, known for its high joblessness.
The working-age employment rate in Greece is three percentage points above its level in 2019. Across the oecd group of mostly rich countries there are about 20m more jobs than had been forecast in June 2020.
The number of unemployed people chasing unfilled vacancies is the lowest it has been in decades.
Even as pricey energy and rising interest rates provoke concern about the economy, there is little sign from “real-time” indicators that demand for labour is dropping.