Quarterly Global Labor Market Outlook: More Tightening in the Second Half of 2019

Amid moderately slowing global economic growth, employment growth is likely to weaken in most mature economies in the coming year as lower demand for goods and services means less need for workers. While the demand for labor may be slowing in most mature economies compared to 2018, the growth rate of the working-age population is low or negative, so even moderate employment growth is enough to further pressure labor markets. Demographics in most countries ensure that labor markets will remain tight. 

Global labor markets at a glance

1. Labor markets in most mature economies are quite tight already, with shortages reaching historic levels in the US, Germany, Japan, and especially Central and Eastern Europe.
2. In Central and Eastern Europe, labor shortages are so severe that they significantly affect employment and economic growth trajectories and the ability of multinational corporations to shift more production to this area. Wages have rapidly accelerated in the region, but in the rest of Europe, wage growth remains subdued.
3. In Japan, unemployment levels are below prerecession rates, but despite a very tight labor market, wage growth has been subdued.
4. Businesses are striving to increase productivity and automate as a solution to a low supply of workers. In the US, we see some green shoots of automation for certain occupations, whereas in Central and Eastern Europe, labor productivity growth has already increased. In most other mature economies, such as Japan and Northern and Western Europe, labor productivity growth remains lackluster.
5. Labor force participation rates have increased in Japan and Europe, especially for women and older people, and this will reduce some hiring pressure for businesses. However, this trend will not be enough to offset the further tightening of labor markets.
6. In China, maintaining the current equilibrium between job losses in industry and job growth in services will depend on the success of new government policies designed to facilitate efficient labor mobility, offset the increasing costs of social insurance obligations for companies, and encourage start-ups.
7. Economic growth in most emerging countries, especially in Latin America, is slowing down in 2019, reducing labor market pressures.

US labor markets at a glance

1. With US economic growth projected to slow and labor shortages growing, the combination of slower revenue growth and faster labor cost growth will squeeze the profitability of corporate America.
2. Rates for voluntary quits and the share of companies with difficulties in filling positions are now at all-time highs.
3. In the US, the divergence in labor market conditions across occupations is continuing. For highly educated white-collar jobs, the labor market is only moderately tight, but in blue-collar and low-pay services occupations, labor shortages are at historic levels. This is partly the result of rapid growth in the demand for drivers and warehouse workers as e-commerce continues to expand.
4. Wages are now visibly rising, especially in blue-collar and low-pay services occupations.
5. Companies are expanding recruitment to new populations to deal with labor shortages. A prominent example is the rapid increase in the share of women in US transportation jobs.
6. Over the past four quarters, labor productivity growth in the business sector reached its highest point since 2010, indicating that employers are getting more out of their existing workforce without increasing headcount. This may reflect increased automation or work efficiency in response to increased hiring difficulties and growing labor costs.
7. The US labor market will further tighten in the next 12 months and labor shortages will become more severe, especially in blue-collar and low-pay services occupations.