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Labor markets in advanced economies have returned to more normal patterns. The collective midlife crisis, when everyone decided that happiness was best achieved by changing employers, has faded. And with job turnover falling, the relationship between job vacancies and unemployment has normalized, notes Paul Donovan, an economist at UBS.
Flexible working may improve labour market efficiency
“The lower number of workers leaving their jobs has reduced the incentive for employers to stockpile workers. This has not led to a significant increase in layoffs – demand in advanced economies is not weak enough to justify this – but it may increase the sensitivity of labour markets to consumer demand in the future.”
“Today’s labor markets are different from pre-pandemic norms. There is evidence that automation is becoming more prevalent when workers are hard to find, boosting productivity. Flexible working can improve labor market efficiency by reducing geographic constraints and allowing people to better match their skills to jobs. This trend also supports more women working for better wages.”
“Cyclically, what matters is whether the fear of unemployment stays low. If unemployment rises because more people are entering the labor market, it means there is less need to worry about economic activity. A decline in employment signals an economic slowdown, not a recession. But if things change and more people who currently have jobs are laid off, the fear of unemployment will rise.”
