interactive investor comments on the remarks made by Andrew Bailey, governor of the Bank of England.
Commenting on the comments made by Andrew Bailey, Governor of the Bank of England, to the Treasury Select Committee this afternoon,Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “‘Helpless’ is the word Andrew Bailey used to describe how he felt amid runaway inflation which has battered household budgets, leaving many consumers feeling the same.
“The harsh reality is we all face a fresh squeeze on living standards in the coming months with inflation set to reach double digits. It is important to regularly review your spending habits to help ensure that you are living with within your means, and it is easier said than done for those struggling.
“On the labour market, while society has reverted to business as usual, or nearabout, labour market participation has not recovered to pre-pandemic levels.
“On the eve of the publication of the latest labour markets figures, Bailey admits that the Bank of England was surprised by the persistence and scale of the drop in the size of the labour workforce and the increase in economically inactive individuals. As such, the Bank has now lowered its projections for labour market participation in its Monetary Policy Report - which is used to devise measures to rein inflation back to the Bank’s target level of 2%. The Bank now assumes labour participation will remain flat – around 63% of the working age population, having previously assumed it would recover somewhat.
“It is not a miscalculation, more of an underappreciation of the different factors. Andrew Bailey pointed to difficulty in predicting the impact of long Covid and the accidental savers phenomenon on workplace participation.
“The impact of the underappreciation is somewhat muted, with other factors such as the Russia’s devastating invasion of Ukraine, shifting demand and bottlenecks to supply following the pandemic (in the US in particular, and the impact of China’s zero Covid policy on its economy), dominating.
“The fact remains that the labour market remains buoyant for jobseekers. The struggle to attract and retain talent has led to employers offering generous carrots – airliner easyJet offering a £1,000 bonus new and existing staff is case and point. With the BoE unsure of when this trend is likely to reverse, there might be more examples of employer generosity’ in future.
“It is clear that something needs to be done to get those who are able into employment. The challenge for some who fall under the ‘economically inactive’ banner is securing a job with meaningful career progression rather than a job to that pays the bills”
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