Other Influences on Growth

Productivity and demography have been the major determinants of growth and this will continue unless there are significant favourable changes in unemployment, hours worked per person and participation rates. These three variables are not, at least in combination, likely to change in a way which will help growth. Unemployment is very low by historic standards and unlikely to be able to fall further without causing problems through the impact on inflation and inflationary expectations. Hours worked tend to rise as incomes per head rise and are thus unlikely to help. Participation rates should improve as those over 65 become more willing to work, but the improvement tends to move cyclically with unemployment where further falls are unlikely. The past help provided by the increase in female participation seems to have run its course. On balance little help to growth rates from these three variables in combination is likely.