Labour market resilience starting to fade

The latest data suggest that the labour market strength, which has been a key feature of advanced economies this year, might be coming to an end. Admittedly, unemployment rates have generally been stable at very low levels. However, falling job vacancy rates and survey measures of hiring intentions suggest that weaker momentum in broader economic activity has begun to hit labour demand. We expect unemployment to rise across the major advanced economies in the months ahead, which will add to the drag on consumer spending from rising inflation. The one potential upside of this is that labour markets tightness should ease, reducing the risks of a wage-price spiral. But, for now, measures of labour shortages remain at record-high levels, meaning that there is still a significant degree of labour market mismatch which will keep wage growth too high for central banks’ comfort for a while yet.