Private regular pay growth is currently running at 3.7% year on year. The reasons for this rise can also be found, to some extent, in job dynamics. There is only modest evidence that those moving position are climbing the ladder any faster. But it is notable that, as the labour market has tightened and skill shortages have emerged, we have seen pay growth among stickers beginning to rise after a long period of tranquillity. In other words, employers’ increased appetite to retain staff, and employees’ increased willingness to consider moving, appears now to be affecting pay. This might also help explain why, although pay has picked up (as stickers are rewarded not to move), there is little sign so far of productivity following suit (as job moves towards higher-productivity firms have not picked-up). With productivity subdued alongside higher pay, growth in annual unit wage costs is now running at elevated levels of over 2 ½% year on year.21 That is in excess of levels consistent with meeting the Bank’s inflation target and begs a question about the stance of monetary policy, to which I now turn. 21  Bank of England estimate using monthly AWE, employment and monthly GVA. 21  All speeches are available online at www.bankofengland.co.uk/speeches  21  A Polarised Economy At present, we are being fed a rich daily diet of news about polarisation in our politics and societies, globally and nationally.
Companies’ investment remains strikingly and significantly subdued. Business sentiment is weak. And UK growth for the year as a whole, at less than 1.5%, is expected to lie below potential. My personal view, though, is that I would be very cautious about considering a monetary policy loosening, barring some sharp economic downturn. First, despite some Brexit-related volatility quarter-to-quarter, underlying UK growth remains fairly steady, if not spectacular, at a fraction below its cruising altitude. Consumer confidence and spending remain robust, underpinned by a still-strong jobs market and rising real pay. The UK housing market may be bottoming-out. When British consumers have more money in their pockets, it takes a lot to persuade them not to spend it. Nothing so far has dissuaded them. And they are three-quarters of all spending in the economy. Second, the starting position for both the economy and monetary policy need importantly to be borne in mind. As best we can tell, there is little, if any, slack left in the UK economy. That is why pay is picking up at pace. UK inflation, meanwhile, is already at target and the monetary stance remains accommodative, with short-term real interest rates still negative, augmented by almost £ trillion of asset purchases. 30  All speeches are available online at www.bankofengland.co.uk/speeches  30  Third, there is sometimes a tendency in the current environment to extrapolate from international experience, or recent historical experience, to the current stance of UK monetary policy.