Hi, I'm Charlie Dyos-Hunter, Senior Public Communications Analyst, and my job is to explain what the Bank does to the public.
Q) How many people have their jobs back and how many people do not?
From easygoing_coyote at Streatham Wells Primary School
A) Hello, what a great question! It is difficult to say how many people got their jobs back, as many people would not return to the place where they lost their job. Most people would usually look for a job somewhere else. Some would also have taken early retirement, emigrated (left the UK) or changed their working pattern (starting working flexibly or part time). This makes it very difficult to get an overall figure.
However, we can look at the number of people that are unemployed and get an idea from that. Before the financial crisis around 5% of the working population did not have a job, but during the crisis this rose to a peak of around 8%. In some parts of the UK it was even higher that. Unemployment has steadily fallen since, so more people are in work and it is now below where it was before the financial crisis!
Unemployment can have a huge effect on the time a recession lasts. If lots of people lose their jobs, then they will not spend much money at all, and the economy can suffer further. Unemployment can have big impacts on those in work as well, as it can mean that they do not get a pay rise. In fact, since the financial crisis, we are only now starting to see people’s wages rising at a level they were beforehand.
Q) Why did it take so long to stop the financial crisis?
From quickwitted_acorn at Notley Green Primary School
A) That is an interesting question. The financial crisis itself only lasted a couple of years (between 2007-2009), but it is the effects we can still see today. A lot of what happens in the economy is based on what businesses and people do. After the financial crisis was over, when the economy was slowly beginning to recover, people were still nervous about spending too much money.
Many people felt that they needed to ensure that they had enough money to protect themselves from any other crises, and businesses were reluctant to invest. It was these nerves that meant pay rises were slow to return, and unemployment remained high. If businesses are worried about future cash flow, they may not invest in their staff or their technology. This means that their productivity (amount of work they can do per hour) did not improve. In the UK we have seen the level of productivity of businesses not improve since the financial crisis.
This can have a large impact on the economy. One example is we become less competitive than other countries, and it reduces the amount of money firms have to spend on future pay rises. Here at the Bank, we have estimated that the economy is 20% smaller than it would have been had the financial crisis had not happened, and productivity had continued to rise at the rate seen beforehand.