It was a bit of an early start this morning but there was a big turnout at a state of the economy briefing by Chris Piper from the Bank of England.
I was interested to find out what is happening in the economy, and the prospects for employment and jobs. Here are the key points:
· Interest rates are likely to rise next year, but it will be gradual and limited – so no major hikes and will probably hit 2% by 2017.
· The economy is recovering, but so far it has been led by household spending - as people become more confident about their future income prospects, they are saving less and spending more.
· Business investment growth has been weak so far, and although this is now picking up and business confidence is rising, this has not resulted in significant investment.
· Real incomes (actual income adjusted for inflation) have not yet recovered. For this to improve there needs to be more business investment growth. This means that businesses will hire more people, which filters into wage inflation and then real incomes increase. Only then will we see a sustained recovery.
So what about employment and jobs? Well the good news is that growth here has been strong, with 700,000 more people in jobs than a year ago. But it needs more business investment and consequent improvement in real incomes for this growth to be sustainable.