Bank of Canada is Schembri speaking
- Assessing labor markets impact of inflation has become more difficult especially in periods of excess demand.
- More uncertainty exists around timing of one output gap will close and inflation will return sustainably to target
- there is uncertainty about level of maximum sustainable employment and relationship between labor market conditions and inflation
- understanding how high the level of employment can get without sparking inflation is crucial
- evidence suggests that the firmly anchored inflation expectations, the relationship between inflation and the output gap has weekend
- structural forces affecting Canadian labor market are likely causing the level of maximum sustainable employment to change making it harder to identify
- traditional tools to measure employment aren't as useful as they once were: the bank is looking at new ways to measure spare capacity in the labor market
- has developed new tools to measure impact of Covid 19 pandemic on workers and employers
- despite recent spike in inflation medium-term inflation expectations have remained relatively well anchored
- considerable excess capacity remains in the labor market; rates of unemployment and underemployment remain elevated
- we expect pandemic shock will have some scarring affects; we could see skills of long-term unemployed workers the road and their attachment to labor market weaken.
