Global growth may have peaked at end-2013 but G7 unemployment should continue to decline through mid-2014. Business survey evidence of rising labour shortages, moreover, suggests that the jobless rate is already at or below a level consistent with stable inflation.

The G7 unemployment rate has fallen from a peak of 8.4% in October 2009 to 7.0% in November 2013 but remains above its post-1995 average of 6.6%. Consumer surveys signal a continued decline: a GDP-weighted average of net percentages of households giving a negative assessment of labour market conditions typically leads major turning points in the jobless rate by about five months and fell to a new recovery low in January – see first chart.

The second chart shows a longer history of the unemployment rate together with a measure of skill shortages derived from the Ifo global business survey. The scales have been adjusted to equalise the averages of the two series. Skill shortages are above average and comparable with late 2006, towards the end of the last economic upswing, despite a jobless rate that remains elevated and about 1.25 percentage points higher than then.

The suggestion that “structural” unemployment has risen significantly, of course, will continue to be strongly resisted by dovish monetary policy-makers – next week’s UK Inflation Report, indeed, will probably claim that the "equilibrium" jobless rate is lower than previously thought to provide cover for the MPC to continue its “forward guidance” experiment.