Bruce Kasman is joined by Joe Lupton and Nora Szentivanyi to discuss our recent research on the dramatic tightening underway in global labor markets. Both our DM and EM aggregates show unemployment rates approaching pre-pandemic levels at the end of 2021, an outcome that contrasts with a still-substantial shortfall in GDP. For both regions, this partly reflects pandemic-related disruptions to labor supply that have depressed participation rates. However, a number of other factors are at work. Demand has rotated toward higher-productivity sectors in the US while European policies have reduced the work week while preserving jobs. In EM, we believe the pandemic hit informal sectors unusually hard, reducing GDP in a manner not fully reflected in measured employment. Central banks across the globe are under increasing pressure to adjust policy in response to rapidly labor markets. For now, the DM central bank response will be limited by hopes that a fading of the pandemic might elicit stronger labor supply (US) and productivity (Euro area) growth. 

This podcast was recorded on February 9, 2022.

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