Current labour shortages are not purely the result of short-term absenteeism related to the virus. Indeed, we estimate that around 80% of the shortfall can be explained by factors that will prove more persistent, such as a fall in migration. It is hard to know just how long they will last, but in some cases, it will be too long for central banks to “look through”. Shortages are most acute and likely to persist for the longest in the US and UK, adding to reasons to expect a relatively sharp rise in interest rates in those economies.
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