The Bank for International Settlements published a BIS Bulletin reviewing recent labour market trends and their implications for wages, inflation and monetary policy. It finds that labour markets in emerging market economies remain broadly stable on average, while unemployment in several advanced economies is edging up and forward-looking indicators point to further weakening. Across advanced economies, unemployment has risen by around 1 percentage point for the median jurisdiction over the past two years as hiring has slowed, vacancies have declined and demand–supply imbalances have reverted to pre-pandemic levels. Labour market flows and survey-based hiring and firing intentions also point to additional softening, with the flow-based unemployment measure deteriorating faster than observed unemployment in several economies and historically tending to lead realised unemployment by up to a year. Structural forces discussed include deregulation lowering structural unemployment, shifting labour supply dynamics driven by immigration and higher participation among older workers, and demographic pressures that are expected to intensify, alongside uncertainty over the employment effects of rapidly diffusing technologies such as generative artificial intelligence. On inflation dynamics, the bulletin notes that nominal wage growth is now outpacing inflation in most economies, with real wage gains often reflecting catch-up rather than productivity-driven increases, and unit labour cost growth slowing in most countries. In advanced economies, the pass-through from unit labour costs to core inflation is described as modest at around 20%, suggesting limited risk of a wage-driven inflation burst, although unit labour costs are still growing at 4% a year or more in Australia, Norway and the United Kingdom. In emerging market economies, the unit labour cost pass-through to prices has risen significantly relative to the pre-Covid period and, alongside recent inflation target overshoots and tight labour markets in some cases, could raise risks of inflation expectations de-anchoring if inflation does not converge to target sufficiently fast.
Bank for International Settlements 2025-09-25
Bank for International Settlements bulletin reports cooling labour markets in advanced economies with rising wage–price risks in some emerging markets
The Bank for International Settlements' BIS Bulletin analyzes labour market trends affecting wages, inflation, and monetary policy. It highlights stable labour markets in emerging economies, while advanced economies face rising unemployment and potential weakening. Nominal wage growth surpasses inflation, with limited wage-driven inflation risk in advanced economies, but emerging markets face increased inflation risks due to higher unit labour cost pass-through.