Rapid employment growth and historically low inflation have been the bedrock of a strong recovery in household incomes in recent years. However, both started to tail off towards the end of 2016 and are unlikely to re-emerge soon.
Meanwhile a major fall in the value of the pound looks set to drive up inflation during the course of 2017, complicating matters not only for households but also for the UK’s monetary policy makers.
As 2017 begins, what are the strengths and weakness of the UK labour market? Will rising inflation feed through into higher wages as it did in the 1970s? Or will workers earnings and living standards bear the brunt of higher prices, risking a new pay squeeze when the UK has barely recovered from the last one? These are key questions for how the Bank of England and its Monetary Policy Committee as it enters 2017.
At an event at the Resolution Foundation offices in Westminster, MPC member Michael Saunders made a keynote speech on the outlook for the UK labour market and the implications for monetary policy. A panel of experts then debated the challenges and opportunities that 2017 brings.