Shortages to Gluts: Labor Market

Shifts in the labor market due to monetary policy tightening would see lagged effects that may not aid central banks’ efforts to materially affect core inflation by year’s end.

Following last year's shift from shortages to gluts in the global market for goods, we are now seeing signs of a shift from shortages to gluts in the global market for labor. But, will the pace be fast enough to bring down core inflation materially by year-end and provide relief to central bankers?

Shortages to gluts

At the height of the supply chain shortages in early November 2021, we warned of a likely rapid move from supply shortages to gluts of goods and materials by the second half of 2022.

"In the past, the markets seem to have moved suddenly from a shortage to a glut. After a year of supply shortages, we may be closer to the end of the supply chain problems than the beginning. As a leading economic indicator, markets tend to look six-to-12 months ahead; they may soon begin to consider the possibility that some shortages may have started to ease, and gluts may have started to form by the second half of next year." – "Will Shortages Lead to Gluts?" published on November 8, 2021.