By Stuart Berry, Matthew Corder, Chris Duffy, Christopher Hackworth and Bradley Speigner of the Bank’s Monetary Analysis Directorate.
The path of labour supply is a key consideration for the Monetary Policy Committee (MPC). It helps to determine the overall supply capacity of the economy and therefore the amount of output that can be produced without generating excess inflationary pressure. Labour supply appears to have grown robustly since the financial crisis, as a greater number of people have retired later and more part-time workers have sought full-time jobs. Nevertheless, the recovery in the demand for labour has led to a significant erosion of labour market slack in recent years, as unemployment, labour market participation and average hours worked have all moved back towards their equilibrium levels.