Even varying just this one thing, the two-year inflation forecast was half a percentage point higher in the second case than in the first. And, in the meantime, we also know that these global pressures are not the only determinant of future inflation. Arithmetically, domestic pressures have been less important so far. But the domestic labour market has also come under increasing strain through the course of this year. I now want to have a look at the latest evidence in this area. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  Unemployment higher than before the pandemic but the labour market nonetheless looks very tight As we saw earlier, while the economic recovery this year has been predictably rapid, cumulative growth over the period of the pandemic as a whole – taking account of the deep trough from which the economy was having to recover – has not been as impressive. In the third quarter of this year private-sector output grew by a little less than we’d anticipated in August and was still 2% lower than at the end of 2019Q4. In contrast, employment growth was stronger than we’d expected and unemployment fell further (Chart 13). And, although in the three months to September it was still a little (0.3 percentage points) higher than just before the pandemic, and still slightly above the MPC’s existing estimate of the long-run “natural rate” of unemployment, other indicators point to a much tighter labour market.
Peter’s review of “What’s the Use of Economics”, the book of proceedings from a conference organised and edited by Diana Coyle, another former student who gave the second of these lectures, held at the Bank of England nearly a decade ago, is Peter at his kaleidoscopic best and as relevant now as when he wrote it. 2  For me as an undergraduate student in the early 1980s it was incredibly stimulating to be learning from Peter about Keynes’, Hicks’ and Leijonhufvud’s contributions to disequilibrium economics, all framed by Peter’s  own quantity rationing exposition of multiple equilibria. It was even more exciting to be taught by someone who was writing about the real-world economic problems of unemployment and how policy could help to achieve a better equilibrium – Peter penned a comprehensive overview article with Derek Morris in the second edition of OxRep in 19853 which is still a very good read today.4  It should therefore come as no surprise that one of the many other topics that Peter turned his prodigious mind to was QE and monetary policy.