In addition to the wage dynamics I just mentioned, we have observed the unemployment rate moving close to its pre-crisis low, with participation rates being higher than ever. At the same time, assessing the tightness in labour markets is not straightforward, for several reasons. First, these aggregate statistics hide substantial cross-country heterogeneity. Second, and more fundamentally, the natural rate of unemployment is unobservable.
Furthermore, tightness in the labour market provides only a partial picture of slack in the economy, as slack can vary across different parts of the economy. It is therefore risky to infer it from just a few economic variables.