But this does not prevent it from being very useful to continue developing aggregate measures of resource utilisation. Secondly, all of the measures described show that resource utilisation has recently fallen rapidly. The GDP gap, the flexprice gap and the indicator that is intended to provide an aggregate measure of resource utilisation show that resource utilisation is already below the normal level. The labour market gaps are lagging behind, but will, according to our current forecast, soon point to labour force use of below normal levels. The GDP gap that is based on an HP trend for GDP indicates that resource utilisation is falling by around 10 percentage points from the peak level in 2007 to a trough in 2010. Although we have used a gradually declining output capacity as a basis for the calculation of the HP trend, this fall in the GDP gap probably gives an exaggerated picture of the fall in resource utilisation during the period as the potential output level ought to have fallen more than is reflected in the HP trend. The deeper and longer the economic recession is, the larger the output capacity that can be expected to disappear. The resource utilisation indicator shows the same picture as the GDP gap, but there are no forecasts for this. BIS Review 66/2009  5  The employment rate and unemployment will deteriorate by around 5 percentage points from 2008 to 2011 according to the forecast we made in April.
But in a monetary policy perspective it may be a problem if resource utilisation is so high that inflation risks overshooting the target. If resource utilisation is so low that inflation risks undershooting the target, the general political and monetary policy implications coincide. An estimate of what level of employment can be regarded as normal can be obtained by calculating an HP-based trend similar to that used for calculating the GDP gap. This can be considered to represent a normal situation in the labour market, without temporary disruptions that affect the supply of or demand for labour. Gaps that measure the actual deviation in employment from the normal level, either in the number of persons or in the number of hours worked, are called labour market gaps. Figure 4 shows two such labour market-based gaps. Capacity utilisation But neither the number of persons employed nor the number of hours worked provides a really good picture of resource utilisation. During a severe cutback in output such as in the current economic situation, companies tend to a large extent to retain their employees, although they have less work for them to do. To obtain a better picture of resource utilisation the labour market statistics need to be supplemented with data from, for instance, Statistics  2  For a discussion of the flexprice gap and monetary policy, see Jonsson, M., C. Nilsson and S. Palmqvist (2008), “Should monetary policy stabilise resource utilisation?" Economic Commentaries 1, Sveriges Riksbank. http://www.riksbank.com/upload/Dokument_riksbank/Kat_publicerat/Ekonomiska%20kommentarer/2008/0803 06e.pdf.