Tension reaches tight labour market quadrant
Tension on the labour market continued to grow in the fourth quarter of 2017 and the tension meter has now reached the tight labour market quadrant, for the first time since the cyclical upturn in 2007-2008. This means that there is an above-average demand for labour and a low available supply. Both the number of jobs and unfilled vacancies have risen again substantially. Furthermore, labour supply (the ratio unemployed labour force/labour force) has declined for nearly four years in a row.
Situation on the labour market
The labour market tension meter is a graphical representation of tension on the labour market. The tension is the result of the balance between the demand for extra labour and the available supply of labour. The tensions is calculated with the aid of the following labour market indicators: the unemployment rate is used for labour supply, and the total number of vacancies divided by the average number of jobs is used for the labour demand. Based on the relation between demand and supply, the tension meter places the situation on the labour market in one of four phases: slack, increasing tension, tight, or decreasing tension.
The figure below also illustrates labour demand and supply. The widest gap between unemployment rate and vacancy rate was recorded at the beginning of 2014. Since then, labour supply has fallen and labour market tension has been rising. The number of job vacancies has increased since the third quarter of 2013.
Unemployment (ILO-definition) and job vacancies, adjusted for seasonal variation