Bank of England policymaker warns of risk to UK jobs market … FT
Bank of England policymaker warns of risk to UK jobs market
By Gavin Jackson in Birmingham
Falling business investment driven by prolonged economic uncertainty risks harming the UK’s strong jobs market, the newest member of the Bank of England’s monetary policy committee has told the Financial Times.
Jonathan Haskel, professor of economics at London’s Imperial College Business School, also said in his first interview since joining the MPC in September that he would wait to see firm evidence of rising inflation
before voting to increase interest rates. This suggests he is likely to tilt the balance of opinion on the nine-strong committee to a more wait-and-see approach to rate rises.
Business investment fell in every quarter in 2018, the first time it had done so outside of a recession since 2003, largely because of acute uncertainty over Brexit.
“The only thing we can be certain of is there’s going to be more uncertainty. That’s what I’m most worried about,” Prof Haskel said. “We’ve had this fall off in investment . . . the labour market has got to follow
that at some point.”
The London-born economist is best known for his work on both science and competition policy. Although he described himself as a “bear of little brain”, he was recruited to the MPC to beef up the central bank’s
expertise on productivity, recognised as the UK economy’s Achilles heel.
I’m sorry I’m going to give you an answer which your readers won’t like — I look at the data and judge it as it comes
Prof Haskel had rarely commented on monetary policy before his appointment, fuelling speculation over whether he was a hawk, as central bankers who more actively prioritise managing inflation are known, or a dove,
their counterparts who tend to be more concerned about growth and jobs.
“I’m sorry I’m going to give you an answer which your readers won’t like,” he said with a chuckle on being asked how he saw himself: “I look at the data and judge it as it comes.”
Prof Haskel joined the committee the month after the MPC voted to raise interest rates for only the second time since the 2009 financial crisis. “Everything has been dominated by Brexit since then,” he said.
Brexit presented a particular challenge to central bankers, Prof Haskel said, in that it potentially reduced the UK’s ability to produce goods and services while simultaneously lowering spending. This is a reiteration
of the BoE’s house line that rates could go either way following a no-deal Brexit.
But his warnings about falling investment and the possibility of a downturn in the jobs market suggested Prof Haskel was less concerned about the possibility that rising wage growth could trigger higher inflation
than he is about the UK’s recent lacklustre growth
Later in the interview, which was conducted before the MPC began its latest formal discussions on interest rates, Prof Haskel said he would “absolutely” wait to see concrete evidence of rising inflation before
voting to raise interest rates. This sets him in line with Silvana Tenreyro, seen by commentators as among the most dovish on the committee.
“If we see movements in output, as economists, we want to see what the movements in price are to know whether it is supply or demand,” he said, pointing to core inflation, which strips out volatile food and energy
prices, as a key indicator for his stance on monetary policy.
Gertjan Vlieghe, a former hedge fund economist and another external MPC member, has often been cast as a dove alongside Prof Tenreyro while Michael Saunders, a former Citigroup economist, is usually more hawkish.
Prof Haskel replaced Ian McCafferty, a former chief economic adviser to the CBI business group and seen as a hawk, on the committee. But Prof Haskel rejected the idea that three of the four external members of
the MPC now formed a dovish bloc. “I don’t see that actually,” he said.
Along with Stian Westlake, a former adviser to the minister for science, innovation, research and higher education, Prof Haskel is the author of Capitalism without capital, a book that examines the economic impact
of an economy increasingly based on intangible investment, such as intellectual property and branding. Intangibles remain his “pet thing,” he said.
The MPC had recently had little time to discuss productivity, he said. “Those more kind of medium-term considerations . . . are kind of less in our minds, I think, than the kind of short-term Brexit issues and
the Brexit uncertainty”.
He took issue with Prof Tenreyro’s recent argument that productivity growth had picked up, saying it was only true until 2017. “Things look worse in 2018, I’m afraid,” he added. Recent falls in business investment
would lead to a “very subdued economy for quite a while”.
On a personal level, the 55-year-old economist said the bank was very “collegiate” and that he had access to its experts on unfamiliar topics. By contrast, in academia “you sit in your room, by yourself, and you
become the world’s expert, by yourself, on something,” he said.
Working on the MPC was “a question of very efficiently finding your way around all the sources of information”, he said, and identifying who can teach you something new. “With one exception, and that exception
is, of course, the governor who has got all this stuff in his head,” he said, referring to Mark Carney with admiration.
“I’ve certainly no complaints, but it’s a big job,” he laughed. “It’s supposed to be three days a week . . . I don’t know how people can manage to do [everything in] three days a week.”