Over the business cycle, a key driver of wage growth is the balance of supply and demand, or labour market “slack”. However, the unemployment rate is an inadequate indicator of labour market slack, particularly when the participation rate fluctuates. Researchers at the Bank have recently constructed a labour utilisation composite index, or LUCI, to help address this problem.
Thank you also to Mr Mark Carney. I want to acknowledge your role in shifting the global financial system to a more sustainable perspective. You shook us awake with your ‘Breaking the Tragedy of the Horizons’1 speech in 2015.