17  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  17  You’d expect all this to lead to matching reallocations in employment – job shedding in the weaker sectors and regions, strong rates of hiring where demand has picked up the most. And in the DMP survey that is indeed what you do see (Chart 21). But it hasn’t yet happened to the same degree as in firms’ reported sales – nor, if we extend the series backwards with other sources of data14, to the same extent as after the financial crisis, whose impact on firms’ output was also highly uneven. Chart 21: Employment reallocation has picked up but still looks lower than after the financial crisis  Sources: Decision Maker Panel, Bureau Van Dijk (based on Companies House data) and Bank calculations. For similar reasons, and again both on the demand and supply side, I would expect these imbalances to subside somewhat as the economy recovers. The underlying dispersion in demand is more likely to narrow than widen further. We’ve already seen some signs of that across sectors, with “social consumption” recovering faster than areas of spending since the economy re-opened (Chart 14 again). In the meantime, the reallocation of jobs, which should also reduce these strains, is likely to continue and may even pick up for a while. However, I’m more uncertain about this process, and the implication for costs in aggregate, than about the transitory nature of goods-price inflation.
One can’t be precise about these things, but I do think that, for reasons on both the demand and supply side, these very rapid rates of wholesale goods-price inflation are likely to subside at some point. Indeed, in some cases they could even go into reverse. When it comes to demand, I think it’s reasonable to expect shifts caused by the pandemic to narrow again as the threat of it recedes. Consumers will rotate some of their spending back to services. To the extent strong demand for durable goods specifically is to make up for ground lost last year that only needs to be done for a while: people buy a new computer or car only once every few years, not every quarter. Indeed there may already be signs – tentative but visible – that these imbalances are beginning to diminish. Retail sales fell in May, in both the US and UK. Spending on Barclaycard doesn’t suggest any reacceleration in June, in this country (Chart 14). It does on the other hand suggest that other areas of spending – those most heavily affected by the lockdowns, like hospitality and restaurants – has been growing faster than that on goods since the economy re-opened in April. Second, supply in some of these goods markets is ultimately quite “elastic”: over time, higher prices encourage higher production, ensuring a degree of self-correction. For some basic commodities the response could be relatively straightforward: it might simply be a question of reopening an existing plant, mine or sawmill.