Bank of England Monetary Policy Committee member Adam Posen spoke at Nottingham Business School last night. The main focus of his presentation was to consider whether the recent recession and, as yet, painfully slow recovery provides evidence of a fundamental adjustment (down) to the trajectory of UK productivity growth. The good news was that he concluded ‘no’. The bad news was that we can expect to see unemployment continuing to rise for some time to come.
Underpinning this conclusion was an incisive analysis of sectoral performance based on, as yet unpublished, analysis by Bank of England economists. The main thrust of this analysis was to suggest that, in the wake of recession, a number of sectors are performing significantly worse (in terms of productivity) than the economy in general – the ‘dawdlers’. These dawdling sectors include financial services, professional and scientific services and, in his view, the highly unionised transport and logistics sector. In these 3 cases Posen suggested that employment had yet to fall to a level commensurate with reduced output – hence his prognosis on unemployment. He would not be drawn on which sectors were out-performing the norm – although there were hints elsewhere in his speech that export orientated manufacturers are worth watching.
He did not address regional differentials in economic performance, but given what we know about the uneven distribution of sectors across the UK regions, this analysis could have significant regional implications. We will post a link to Posen’s presentation as soon as it is published by the Bank of England.