Labour market recovery won’t spark wage spiral

We estimate that the spare capacity in the euro-zone’s labour market has increased by around four million people, or 2.5% of the labour force, since the start of the pandemic. This is likely to disappear over the next couple of years as the economy recovers. Labour shortages are appearing as the economy re-opens, but these are likely to prove temporary and so will not put general upward pressure on wages or inflation.