Prior to the pandemic, a clear negative relationship existed between vacancies and unemployment. The experience of 2020 challenged this relationship and seemed to indicate labour market inefficiencies.
As the holiday season draws to a close and we head towards September, a number of pending and actual economic train crashes will occur, following each other in quick succession. The lack of strategic thinking in the European and the UK governments will be felt with a vengeance.
East or west, north or south, whichever way you look there is political and economic chaos. This leaves lots of room for excitement, punditry, and the general forecasters of doom.
While the weather looks better and we can hope for the balmy days of summer bringing relief from Covid, the Ukraine nightmare drags on. Russia seems to have resolved to destroy Ukraine and its infrastructure by targeting the civilian population, housing, factories, and supply chains.
It’s difficult to underestimate the crisis we are heading towards. Years of prosperity and Western complacency have left us in a bad position to deal with the next few years.
Economic models and, in particular, central bank models are wonderful constructs built by trying to fit historic information into a model which can then be played with. From a central bank point of view, it enables them to project an aura of certainty based on their special knowledge.