This pace of growth would likely be sufficient to continue to absorb any remaining slack in the labor market and to support inflation moving back to our 2 percent objective. However, any forecast is uncertain and growth could end up higher or lower. Let me turn to an assessment of the balance of risks around my growth outlook. I believe that a sizable pickup  1  Tobias Adrian, Matthew Higgins, Jonathan McCarthy, Paolo Pesenti, Robert Rich, Giorgio Topa, Joseph Tracy and Peter Van Tassel assisted in preparing these remarks. BIS central bankers’ speeches  1  in the rate of growth of economic activity relative to that in my forecast seems unlikely for a number of reasons. Although consumer spending strengthened substantially in the second quarter, that stronger pace is unlikely to be sustained going forward. That is because the fundamentals supporting consumption have softened somewhat. Real income growth moderated in the second quarter as the pace of job gains slowed and the inflation rate rose, boosted by somewhat higher energy prices. Even with the surprisingly large addition of 287,000 payroll jobs in June, the pace of improvement in the U.S. labor market appears to have slowed somewhat. For example, over the past three months, payroll gains have averaged about 150,000 per month, as compared to an average of more than 200,000 per month over the course of 2015 and the first quarter of this year.
20 Current UK household debt is twice the 2002 level in aggregate but debt servicing cost is half so the debt  service ratio is unchanged 21 For example, micro data studies from the UK, US, Denmark and Norway have all found statistically significant correlations between higher levels of household debt and the size of consumption cuts in a shock. For example Andersen et al (2016), Kovacs et al (2018), Dynan and Edelberg (2013) and Fagereng and Halvorsen (2016). 10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  One might expect to see similar effects in the corporate sector. And indeed, Bank staff estimate that the share of corporate debt owed by highly leveraged companies has now pretty much grown back to pre-crisis levels. 22  This is a risk because we know that more leveraged firms cut back on investment and employment by more in a downturn.23 All else equal therefore – and crucially, absent policy – a low for long world is likely to be one with a less resilient and riskier financial system and a more leveraged real economy that, as a consequence, is more vulnerable to macro-economic shocks. Financial stability challenges of low for long: the risk of more severe downturns And this brings me to the third challenge of low for longer for financial stability – the risk that in such an environment, economic downturns will on average be more severe.