, i want to touch on the issue of trade - offs in the context of disinflation and labour market dynamics. historically, the slope of the phillips curve described the trade - off between unemployment ( or slack ) and inflation. however, recent work that includes the vacancy to unemployment ratio ( ‘ vu - ratio ’ ) in the phillips curve raises the important question of whether an easing in labour demand occurs mostly at the hiring margin – in other words, fewer job openings – or whether unemployment also rises. 8 in the us, which started its hiking cycle earlier than the euro area, the adjustment so far has been mainly through a reduction in job openings. at the same time, job switching, an important driver of wage growth dynamics there, have fallen back to pre - pandemic levels. 9 wage growth has also slowed markedly in recent months. for ireland, we only have a short time - series of job vacancy data, so it is difficult to compare changes in the vu - ratio over previous cycles. however, recent job hiring statistics show that the post - pandemic surge peaked in the first half of 2022, and has since fallen back ( figure 9 ). along with the decline in job openings, this is further evidence of some weakening of the demand momentum that built up after re - opening. however, at 6. 7 per cent ( of total employment ) in q1 2023, the new hiring rate remains above its long - run average of around 6 per cent. figure 9 : new hires ( ireland, as per cent of employment ) source : labour force survey ( cso ). new hires are defined as workers with job tenure of three months or less in a given quarter. for the euro area as a whole, we can construct a longer vu - ratio time series back to the early - 1990s. decomposing changes in the vu - ratio, a number of stylised facts emerge ( figure 10 ). first, cyclical variation in the employment rate are typically accompanied by changes in both job vacancies and unemployment ( moving in opposite directions ). that said, there are some cyclical slowdowns where job vacancies declined but unemployment did not rise, for example in the mid - and late - 1990s. the dot - com bust, which shows up as below - trend employment growth during 2002 - 03 is another episode where job vacancies accounted for the bulk of the change in the vu - ratio, although unemployment also rose slightly during this

and the sharp tightening of monetary policy over the last year. this is contributing to historically tight labour markets, although we may have passed ‘ peak tightness ’, as seen through the recent decline in job openings in some countries, and weaker forward - looking employment indicators. in the first half of my speech, i will focus on the first two aspects of resilience : strong labour demand and supply. this is important context for the remainder of my speech, where i focus on labour market tightness, wage dynamics and the implications for the inflation outlook. i conclude with an overview of the economic outlook in the recent ecb projections and the central bank ’ s quarterly bulletin, published earlier this week. the post - pandemic labour market : a tale of demand and supply employment in ireland reached a new record of over 2. 6 million in the second quarter of 2023, up by almost 12 per cent on 2019, and more than 5 per cent higher than pre - pandemic trend growth. in the euro area, employment stands at over 168. 5 million persons, up 3 per cent on pre - pandemic levels and another record high. while 3 per cent euro area employment growth looks small compared to ireland ’ s 12 per cent growth, it is important to place the figures in context. pre - pandemic trend employment growth was already stronger ireland, for both demand and supply reasons. continental european countries face demographic headwinds due to falling birth - rates and ageing populations ( ireland is on a similar path, albeit some years behind ). 1for example, italy ’ s working - age ( 15 - 64 ) population decreased by 3 per cent between 2020q1 and 2023q1, but employment increased marginally by 0. 7 per cent, a 3. 7 per cent swing. the higher italian employment rate – up from rising from 58. 4 to 60. 6 per cent – is due to a combination of lower unemployment ( 7. 6 per cent in july 2023, down from 9. 7 per cent in december 2019 ) and increased labour force participation ( up from 65. 6 to 66. 2 per cent ). with the exception of euro area manufacturing, which has only recently returned to pre - pandemic levels, employment growth is spread across sectors ( figure 2a - 2b ). within services in ireland, both business services and public services have had exceptionally strong employment growth in recent years. developments in total hours worked have been weaker than employment (