Labour markets succumbing to the gloom

The past month has brought evidence of a continued slowdown in global growth and this weakness now seems to be spreading to labour markets. While advanced economy employment growth held up very well during the initial stages of the slowdown, it has now weakened to its slowest pace since November 2013. (See Chart 1.) This softening has been common to all major advanced economies. Unemployment rates have yet to pick up from low levels as labour force growth has also declined. But with surveys pointing to a further slowdown in employment in the coming months, we suspect that job losses are to come. Wage growth therefore seems unlikely to keep rising and may even slow before long. This will remove any lingering doubts among central banks about whether the previous strength of growth will yet feed through to stronger price pressures. The case for widespread policy loosening is becoming stronger and stronger.