Will labour shortages spur productivity gains?

Will labour shortages spur productivity gains?

One possible upside of the current labour market shortages in developed economies is that they could push firms towards expanding output by raising investment and productivity instead of relying on cheap labour. However, any gains in productivity may not materialise quickly enough to prevent central banks from reacting to the pick-up in wage growth. In view of the wider interest, we have also made this Global Economics Focus available to clients of our Long Run Service.
Vicky Redwood Senior Economic Adviser
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Global Economic Outlook

Growth to disappoint, but rates will rise regardless

Global growth will be slower this year than last and we expect outturns in major economies including the US and China to be below consensus forecasts. The US economy will be hindered by persistent labour shortages and reduced policy support while China will suffer from a slowdown in export growth and further weakness in the construction sector. Headline inflation is very likely to fall, but we expect core inflation to remain elevated across the developed world as shortages persist and wage growth picks up. Accordingly, most central banks are set to raise interest rates, although China will be a notable exception.

25 January 2022

Global Economics Update

PMIs: Omicron hit worse in the US than other DMs

The Flash PMIs for January suggest that Omicron has dealt a big blow to both industry and services sectors in the US in recent weeks, while other DMs have got off more lightly. But with new cases falling in several DMs, we think the economic hit will prove short-lived and will be mostly made up for in the months ahead.

24 January 2022

Global Economics Update

What if energy prices keep rising?

While ongoing supply shortages have led us to revise up our forecasts for crude oil and wholesale gas prices, we still expect significant falls this year which would reduce headline inflation in major developed markets by around 2ppts. But there are upside risks. In a plausible scenario involving Brent crude hitting $120pb, headline inflation would stay far above target in major DMs, at about 5.5% on average in 2022.

20 January 2022

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Long Run Update

Our climate change assumptions

Ahead of publishing our latest Long-Term Outlook next month, this Update sets out the assumptions we have made in our long term forecasts about both climate change and the efforts to prevent it.

13 January 2022

Long Run Update

Ongoing pandemic to slow migration’s return to normal

The continued threat of new virus waves, and therefore fresh rounds of travel restrictions, suggests that global migration flows could remain subdued for a while yet. However, we continue to doubt that the pandemic will have any major lasting impact on migration flows.

16 December 2021

Global Economics Update

There’s room for more fiscal support if needed

Concerns about the new Omicron variant raise the question of whether there is scope for policy to be as supportive during a new wave of the virus as it has been so far in the pandemic. Significant policy stimulus would probably only be needed if things got really bad again. If they did, financial markets would probably tolerate a further rise in government spending and borrowing; instead, the constraints would be political ones.

9 December 2021
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