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Pill says labour market is still the key here

BOE
  • Pill says they "increasingly think" that excess savings have been used up in the UK; there wasn't a consumption boom in the UK - largely because of shocks - so don't think the savings have been inflationary.
  • Says that labour market is key here. Still trying to understand implications of the furlough scheme. When that ended didn't see a release of workers from the labour market. Looking forward there have been less favourable developments in labour supply versus the last year: Long-term sickness an increasing reason. Also changed migration through leaving EU which has implications for labour supply.
  • May mean less flexibility in the labour market and there are generally issues around mismatch in the labour market. Increasingly given difficulties in recruiting are seeing labour hoarder behaviours and perhaps the re-emergence of insider-outsider dynamics in wage setting. Certainly see big discrepancy between what surveys tell us what new hires are being paid and what incumbents are being paid - that type of discrepancy suggests the labour market is behaving in a different way.
  • They key question is how much of this is a consequences of an environment where we haven't seen insolvencies and as we now move on with higher interest rates and a les favourable demand environment - that is a key area of concern/focus of our analysis. It's an area that's important but also an area where the statistics are in flux. So there are issues around interpretation.
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