The recent evaluation of labor market dynamics in advanced economies (AEs) has highlighted several key issues that could affect the normalization of inflation. A noticeable shift in the Beveridge curve, which illustrates the relationship between job vacancies and unemployment, indicates changes in labor supply dynamics.
Since the pandemic, recovery in labor force participation across AEs has been slow and uneven. This persistent tightness is evident through high job vacancies and recruitment challenges faced by firms. Companies seem to be engaging in labor hoarding, contributing to significant wage growth.
There are signs of normalization as improved supply conditions emerge within these markets. However, some shifts may take longer to resolve, maintaining a risk of enduring changes to wage-unemployment dynamics.