When unemployment fell to 7.1% earlier this week, harsher pundits took the opportunity to point and laugh at Mark Carney, who had in the summer issued forward guidance which said a) that the Bank of England won’t raise interest rates until unemployment drops to 7%, but b) that no one needs to worry because it’s wholly improbable that will happen before 2016 anyway.
Of course, that turned out to be completely wrong: on Wednesday, the Office for National Statistics published data showing that unemployment had fallen by its most in 16 years. Which, along with just about every other economic indicator out there, suggests recovery is happening faster than most of us had expected.
Does this mean Carney’s forward guidance is ‘in tatters’, as some suggest? The governor himself cheerfully admitted, during an interview in Davos, that there is no ‘immediate need’ for a rate rise. The UK was in a ‘different place’ than it was in August, he explained – but that doesn’t mean the Bank will reduce its forward guidance threshold from 7%.
‘There is a broad range of things we could do, I wouldn’t jump to that conclusion… we’re trying to get across that it’s all about overall conditions in the labour market. We wouldn’t want to detract from that focus by unnecessarily focusing on one indicator,’ he said.
To his credit, George Osborne defended Carney. During a debate (also at Davos), he praised the Bank of England governor.
‘I completely reject that forward guidance is a failure. I think the Bank has provided clear communication and supportive monetary policy.’
To be fair, there is an argument that the forward guidance was exactly what was needed to give businesses enough confidence to start creating jobs again, thereby reducing unemployment. So in that respect, Carney’s plan worked. Swings and roundabouts, innit.
Elsewhere at Davos, David Cameron put in a typically jargon-tastic appearance at the Congress Centre, focusing his speech on ‘re-shoring’. MailOnline political editor Matt Chorley reported that it went something like this:
What is re-shoring? Why, ‘tis the opposite of off-shoring, of course – which Cameron reckons is the key to strengthening recovery.
‘We are setting up a one stop shop to help businesses capitalise on the opportunities of re-shoring,’ he said, as linguists everywhere wept.
‘Much as Britain can be the "re-shore nation", so Europe can benefit from this too. But only if we act now to make re-shoring as attractive as possible.’
Basically, the PM wants to drive jobs previously outsourced to other countries back to Blighty. The key to that is, apparently, lower energy prices, which can be driven down if the UK embraces fracking.
‘There is no doubt that when it comes to re-shoring in the UK, one of the most important factors has been the development of shale gas, which is flooring US energy prices with billions of dollars of energy cost savings predicted over the next decade,’ said Cameron.
To a certain extent, Cameron is jumping on a bandwagon over which he has no control. As economies like India get more expensive, the cost advantages of moving jobs abroad disappear. To a certain extent, it's already happening - whether Cameron repeats it over and over and over or not.
Has Cameron just coined the OED’s word of the year for 2014? MT does not feel re-shored.