Getting over Covid  Speech given by Andrew Bailey Governor of the Bank of England  Resolution Foundation 8 March 2021  I am grateful to Lauren Barnes, John Barrdear, Philip Bunn, Andy Haldane, Jonathan Haskel, Karen Jude, David Latto, Clare Macallan, Nick McLaren, Marko Melolinna, Sophie Piton, Alex Rattan, Kate Reinold, Michael Saunders, Fergal Shortall, Brad Speigner, Silvana Tenreyro, Matt Tong, Jan Vlieghe, and Chris Young for their assistance in helping me prepare these remarks. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction It’s a great pleasure to be participating in a Resolution Foundation event today. I wish I could say what a pleasure it is to be at the Foundation, but that has to remain a hope for the future. I am going to talk today about the future, the post Covid future as the economy recovers from this traumatic experience. If I had to summarise the diagnosis, it’s positive but with large doses of cautionary realism. To summarise, after starting with some description and assessment of the Covid shock to the economy, I am going to draw out four important points:   Covid has been both a demand and supply shock to the economy, and the recovery therefore has to be in both elements, unusually so for recoveries I think. Absent a dual recovery, dealing with the issues that arise will be more difficult.
Employment, total hours worked and unemployment all tend to be highly persistent, so a rise in unemployment means – based on history – that it will be higher a year from now. That said, the UK labour market has adjusted relatively quickly to large shocks in the past (Broadbent, 2012). In normal times, around 9% of workers change jobs every year, but the tendency to persistence provides evidence from the past of the effects of a mismatch between the skills of job seekers and those required by hiring firms. As I noted earlier, some of the sectors hardest hit by the pandemic employ more young and low-skilled workers, who may find it hard to move between sectors (Haldane, 2020). That difficulty will be amplified if the jobs involve different tasks. Bank staff have analysed the task content of different jobs to quantify the extent of task reallocation required in various scenarios. In a relatively extreme scenario where the pattern of consumer spending is unchanged from 2020 Q3, staff estimate that the extent of the task reallocation over coming years would be higher than in the recent past, but much less than occurred during the 1980s and early 1990s. That was a period of 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  significant structural change during which the share of employees working in the manufacturing sector fell from 26% to 16%. There are two important points I would emphasise here.