Hal­cyon pe­riod for jobs ended by pan­demic, says Hal­dane

The Daily Telegraph - Business - - Business - By Tom Rees

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.

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