2  BIS central bankers’ speeches  Far more vacancies remain unfilled than usual, indicating big mismatches in the labour market. And fewer people than normal are switching jobs, suggesting an ongoing reluctance to take risks. The American labour market still is not working as it once did. The UK Even though times for many families have been tough, relative to that benchmark, the UK labour market has performed well. Despite a recession that was deeper and more prolonged, unemployment did not rise as much and has fallen back sharply since. 4 In contrast to the US, this rapid fall has been accompanied by significantly higher participation rates. There are now over one million more people in work in the UK than at the start of the crisis. Total hours worked are some 4% above their pre-crisis level. That exceptional employment performance has come at a cost, however: wage growth has been very weak. Adjusted for inflation, wages have fallen by around a tenth since the onset of the crisis. To find such a fall in the past, you would have to look back to the early 1920s. The weakness of pay has, in effect, purchased more job creation. It has not resulted in an unusually high level of profits. The burden of the Great Recession has been shared across the UK. Profits have been squeezed almost as much as labour costs. Employees have seen their real incomes reduced, but more people are in work as a result.
For example, the regional house price indices used to calculate changes in housing wealth may be capturing wider regional variation in labour demand. 13  Eggertson and Krugman (2012) illustrate how increased labour supply is one margin through which households that need to de-lever can do so. Eggertson, G and Krugman, P, (2012), “Debt, deleveraging and the liquidity trap: a Fisher-Minsky-Koo approach”, Quarterly Journal of Economics. 14  See Bunn, P and Rostom, M (2013), “The financial position of British households: evidence from the 2013 NMG Consulting survey”, Bank of England Quarterly Bulletin, Q4. 15  Based on the relationship between average earnings adjusted for inflation expectations and unemployment between 1993 and 2012. See Broadbent (2014), “Unemployment and the conduct of monetary policy in the UK”, Speech at the Federal Reserve Bank of Kansas City 38th Economic Symposium, Jackson Hole, Wyoming. 16  See eg Broadbent (2012), “Productivity and the allocation of resources”, Speech at Durham Business School, September. BIS central bankers’ speeches  5  This substitution of labour for capital across the economy has continued to lower productivity per hour worked. That weak productivity growth is not the result of laziness on anyone’s part. It is a natural consequence of so many people wanting to work and companies employing them in place of capital.