By Mike Dolan
LONDON- For all the trepidation about world trade, debt and inflation, it could well be worker shortages that define economic trends this year – on both sides of the Atlantic.
Immigration curbs and deportations form a central plank of the agenda of President-elect Donald Trump, who returns to the White House on Monday. If he follows through with these plans, up to 1 million illegal migrants could be deported over the next two years and US population growth could slow as a result.
Meanwhile, in Europe, there’s growing speculation that a durable ceasefire between Ukraine and Russia could see many refugees and migrants currently spread across Europe begin to head home.
More than 4.3 million Ukrainians have fled the country since Russia’s invasion in 2022, with more than 1 million settling in Germany alone. Many Ukrainians were given legal rights to live and work in Europe in a 2022 European Union directive. The prospect of losing at least some of these workers is already prompting concern in some central European nations.
A significant decline in workers at this juncture – when labor markets in many economies remain hot despite the severe borrowing rate spike over the past two years – is rekindling concerns that some countries could face a potentially stagflationary supply squeeze.
The prospect of a fresh upturn in wage inflation is just one more headache for central banks that otherwise seem keen to roll back the interest hikes of 2022 and 2023.
The International Labor Organization, a UN agency, said on Thursday that the global jobless rate remained at a historic low of 5 percent last year. It forecast that the rate would stay there in 2025, dipping further to 4.9 percent next year.
And mapping out longer-term ageing and fertility trends to illustrate how ebbing labor supply is affecting that, JP Morgan strategists noted the working-age population in developed economies as a whole looks to have peaked at 746 million in 2023 and is projected to fall by 47 million through 2050 based on UN forecasts.
This all sets the stage for a year that could see US and European businesses experience an echo of the labor market anxieties that emerged in the wake of the pandemic.
Indeed, the heat of the US jobs market doesn’t seem to have dissipated much last year.
Although difficulty in hiring on an aggregate level appears to have returned to pre-pandemic levels, US small business surveys continue to flag acute worker shortages in key sectors such as transportation, construction and manufacturing. – Reuters