-1.5 1991  1996  2001  2006  2011  2016  2021  Two-quarter averages. Sources: ONS and Bank calculations. A more obvious contributor is the pace of hiring in the public sector. Since the beginning of the pandemic employment in public services has risen by over 4% (Chart 17). Some of this could be temporary – people hired for “track and trace”, for example, or to administer vaccines. However, based on the spending plans in the November Budget, the OBR expects overall employment in the public sector to carry on growing, by a further 3% over the next three years. If some of the recent hires are temporary they look set to be replaced by others7. In the summer, it looked as though the remaining numbers in the furlough scheme might also be part of the answer. On the face of it, in July, there were still 1.6 million private-sector jobs – around 6% of the total – still in the CJRS. In principle, all these people were ready and able to come back fully into employment and quench the growing thirst for labour. But even then it was puzzling that more of them hadn’t already been re-employed: even when furlough costs were paid in full by the taxpayer it would presumably have been cheaper for firms just to pick up someone on furlough than to go looking for someone else and post a new vacancy. That puzzle became more acute once firms were required to contribute progressively more to those costs.
The aggregate rate of inflation is likely to rise further over the next few months and the chances are that it will comfortably exceed 5% when the Ofgem cap on retail energy prices is next adjusted, in April. The cap is based on a trailing average of forward prices in wholesale energy markets. The relevant period for next April is between August this year and February 2022. Two-thirds of the way through we can already be reasonably certain (unfortunately) of a further significant rise in retail energy prices next spring (Chart 1). Chart 1. Gas bills likely to rise significantly again next April 900  Average bill, £ per year  Wholesale cost (p/therm)  Chart 2. Goods prices account fully for the current overshoot in inflation relative to target Percentage points  140 120  800 100 700  Gas bill (LHS)  600 Wholesale gas costs relevant for each Ofgem cap period (RHS)  500 400 300 2019  CPI inflation (per cent)  2021  2022  2023  4 Other goods (39%)  3  80  2  60  1  40  0 Food and non-alcoholic beverages (11%) Fuels and Electricity and gas (3%) lubricants (3%)  20 0  2020  Services (43%)  5  2024  The Ofgem cap is adjusted twice a year.