We examined changes in aggregate labor supply and labor demand across eight of the largest advanced economies, using data on employment, unemployment, and job openings from 2010 to 2023. We also analyzed labor demand at the sector level in seven of these countries—data for Japan wasn’t available—to understand the impact of labor tightening on different industries.
Notwithstanding some recent softening, we found a long-term trend of labor market tightening in all economies. From 2010 to 2023, vacancies rose in all sectors, with the share of vacancies in healthcare and construction rising the most. Elevated labor market tightness resulted in unrealized output of 0.5 percent to 1.5 percent of GDP across economies in 2023, as businesses shortened hours of operation or turned down orders that they couldn’t fulfill due to a shortage of workers.
To achieve recent levels of economic growth, countries will need to increase productivity or expand labor force participation—and, in some cases, do both. While these overall trends hold across economies, there are important nuances at both the country and sector levels, so we offer a deeper look here.
