Halcyon period for jobs ended by pandemic, says Haldane
COVID-19 could trigger a lasting rise in Britain’s unemployment rate, marking the end of a “halcyon period” for job creation, the Bank of England’s chief economist has warned.
Andy Haldane, a member of the Bank’s rate-setting committee, said the risk of a Eighties-style unemployment crisis is the “single biggest threat” to the economy’s recovery. Younger workers are particularly at risk from the threat of joblessness.
Mr Haldane said the decade prior to the pandemic was a “halcyon period of continuous growth and job creation and we are in the opposite of that world right now”.
Speaking to MPs on the Treasury select committee, he said: “Over that previous period we had been nudging down our estimate of the level of unemployment at which wage pressures picked up down to 4pc, now we are in the reverse situation.”
However, Mr Haldane also insisted there were signs of a strong economic rebound from the crisis.
‘We have seen a bounceback. So far, it has been a ‘V’. But that doesn’t tell us about where we might go next’
“Roughly half of the roughly 25pc fall in activity during March and April has been clawed back over the period since,” he said.
“We have seen a bounceback. So far, it has been a ‘V’. That of course doesn’t tell us about where we might go next.”
He said GDP has been growing at about 1pc every week after it collapsed by a quarter in March and April.
Silvana Tenreyro, another rate-setter facing MPs in a hearing to be reappointed to the Monetary Policy Committee, was less upbeat than her colleague on the strength of the recovery, warning that Britain is facing an “incomplete” V-shaped bounceback as lockdown measures ease.
Ms Tenreyro said she was less confident than Mr Haldane about the signals from experimental “fast” indicators about the state of the economy.
Industries such as hospitality and travel could be permanently damaged by the coronavirus catastrophe as consumer habits change, meaning workers will need to move out of shrinking industries to growing ones.
Some economists fear laid-off workers may not be equipped with the sufficient skills to adapt to the new labour market while those with in-demand qualifications are able to demand higher wages.