Some companies have longstanding pension fund deficits that need to be fed, if not eliminated. Others, particularly some SMEs, ought to be leveraging up as they grow but may be struggling to get sufficient credit (at least in aggregate). And many firms borrow to fund activity in the commercial property sector which remains relatively weak. Collectively the economy as a whole also needs to rebalance. The significant external trade deficit built up pre-crisis needs to close up further to be sustainable in the medium term. If this description of the changing economy is correct, why has it happened and how does that affect the outlook? Until 2008 it did not appear that the UK economy was growing faster than the very long established trend. Maybe that trend had shifted without anyone noticing? Perhaps the growth of the financial sector crowded out other industries and the financial crisis has left a hole that needs to be filled by other sectors? Perhaps globalisation has shifted activity from developed to emerging economies? The rise in global energy prices clearly makes us all worse off and is likely to be an important factor. Or maybe it is just that the crisis in Europe has turned out to be such a big drag on the UK – not just through trade but through financial markets and through general household and business confidence? The source – or sources – of the revision to income expectations will matter in the medium to long term.
For example, Etsy, the popular e-commerce website, which in many ways resembles a retail company, relies on technology to underpin its business model. But it’s not just New York City that is growing nicely. Employment levels on Long Island and in parts of upstate New York—most notably the Albany, Buffalo and Rochester metro areas—have also climbed and are at or near record highs. During my recent trip to upstate New York, I saw first-hand some of the positive developments in Rochester and Buffalo. After undergoing a prolonged period of economic transformation and reinvention, Rochester’s economy is now more diverse and dynamic than ever before. Meanwhile, the growth in Buffalo was striking. The numbers show a dramatic uptick in construction 2  BIS central bankers’ speeches  employment, and the visual evidence of development was widespread. I was especially impressed with the downtown and waterfront areas, as well as the new SolarCity factory—all of which looked dramatically different than when I visited the area less than two years ago. Both of these places are well positioned for future success. On the other hand, the employment recovery has been slow to take hold in both Northern New Jersey and the Lower Hudson Valley, where jobs are still not back to their pre-recession peak despite employment growing steadily. For Northern New Jersey, this lag is due, in part, to a stall in the growth of jobs in professional and business services. But the education and health sectors continue to add jobs, and construction employment is seeing a rebound.