Shortages of labor are emerging in developed economies as companies reopening after the coronavirus blockade seek to rapidly reclaim workers, in a development that threatens to increase wage costs for companies.
Pressures are most evident in the United States, economic data suggests. Jennifer McKeown, at the Capital Economics board, said there was “already clear evidence of joblessness in the U.S. business survey,” with growing vacancies and employees working more hours than was typical in the past.
Unemployment in Europe has begun to fall, and in London and Berlin, as in American cities, bars and restaurants have struggled to fill vacancies – raising the question of whether pay should increase to attract staff.
But with the US economy stop some 10m short work of its pre-pandemic trend, and 5m workers working only in France and Germany at the end of the first quarter, employers should in theory be able to reach a group of people looking to return to work.
In the United States, some politicians and economists they argue that a combination of generous unemployment benefits, health problems and child care problems could keep people out of the workforce.
In the UK, employers say they have found that many EU citizens have left and some people are wary of leaving the relative safety of the furlough for a new job, until the threat of further closures is raised.
Even in the eurozone, where economies are in an early stage of reopening, recent business surveys suggest it is becoming more difficult to assume.
It is also unclear if this will start to increase pay. In the US, the Quarterly Employment Costs Index showed the largest increase in wages for 14 years in the first quarter of 2021, but it is lagging behind ground events and may be volatile. In the euro area and the United Kingdom, the main measures of wage growth have been distorted by the low number of low-paid workers who are still out of work and by reductions in working hours due to furlough. and short-term work patterns.
“If the obvious work gaps in the recent data are not resolved, then [US] wage growth is about to disappear. Job demand is raging, ”Ian Shepherdson told Pantheon Macroeconomics Council.
But, he added, some of the pressure may turn out to be temporary – especially when schools reopen and unemployment benefits become less generous.
“No one knows for sure if these people have left the workforce. So no one knows for sure if they will return,” he said.
Heidi Shierholz, director of policy at the Institute for Economic Policy, argued that hospitality and entertainment wages in the United States were only returning to their pre-pandemic trend and were unlikely to lead to further pressure. large because they remained much lower than wages in other sectors.
“There is very little evidence that the hot labor market in the leisure and hospitality sector is on track to catch fire in the rest of the economy. . . The lack of work leading to wage acceleration in this sector does not only work with a leverage long enough to push wages across the board, ”he wrote in a recent blog.
Other economists argue that pay pressures are real in the United States, but should be weaker and more transient elsewhere, particularly in the eurozone.
Holger Schmieding, an economist at Berenberg, said this is partly due to differences in wage bargaining systems. He noted that wages tend to adapt more slowly to the oscillations of economic growth in continental European countries where many workers were covered by sectoral wage agreements.
In some countries, wages were indexed to inflation last year, meaning increases will be small in 2021.
In Germany, sectoral pay deals concluded “under the shadow of the recession” will last two years, so even a strong return in the industry will not present itself in wages for some time, Schmieding said: “Moderation salary is already cooked up in the pie for next year ”.
In addition, employers in both the UK and the euro area may have a larger pool of jobs to reach. Economic inactivity is growing everywhere, but McKeown argued that in the United States, many workers who had left the labor market had chosen to retire permanently. In the UK and the euro area, at least some furloughed employees could be laid off when wage subsidies expire and re-enter the labor market.
Nick Kounis, economist at ABN Amro, said there was “a great deal of occultation [eurozone] unemployment. So once a part of the pandemic-driven volatility exists. . . we may be faced with a very familiar view: inflation below the [European Central Bank’s] price stability goal ”of a rate below, but close to, 2 percent.
Ultimately, the outlook for wages in developed economies will depend on the strength of their recoveries – and on the extent of stimulus governments and central banks continue to deploy in the coming months.
Particularly for the eurozone, Schmieding has warned that stronger wage growth will follow only once the bloc has reached full employment – something he estimated would take a year and a half to two years.
In contrast, he said, “the United States is in fiscal overdrive. The U.S. economy will be in heat much earlier than that of the eurozone.”