and shakir, t ( 2013 ), “ macroeconomic uncertainty : what is it, how can we measure it and why does it matter? ”, bank of england quarterly bulletin, vol. 2, no. 2, pages 100 – 109. bis central bankers ’ speeches uk unemployment rate us unemployment rate source : ons, bls chart 5 : chart 6 : us participation rate falling, uk rate rising us employment rate has fallen by more than uk rate % % uk participation rate uk employment rate us participation rate us employment rate source : ons, bls source : ons, bls chart 7 : chart 8 : uk productivity exceptionally weak uk real wages have fallen £ at 2010 prices £ at 2010 prices 1977 1982 1987 1992 1997 2002 2007 2012 output per hour worked trend source : ons, bank of england calculations 1977 1982 1987 1992 1997 2002 2007 2012 real wages per week source : ons, bank of england calculations bis central bankers ’ speeches

should have been a persistent deterioration in the rate of potential growth in britain. this hypothesis holds particularly now that the uk financial system is beginning to function more effectively. until recently, the weakness of the banking system limited the reallocation of capital and labour from less to more productive activities. indeed, whereas half of all productivity growth at the economy - wide level in the years prior to 2008 occurred through this channel, reallocation appears to have made no contribution to productivity growth in recent years. 5 there are other reasons to think that growth itself should bring a supply side improvement. as the economy recovers, investment should pick up and part - time workers should shift into more productive full - time work. with the sharp fall in real wages during the recession ( chart 8 ), employees effectively priced themselves into low - productivity work at a time of weak demand. to the extent that this allows skills to be retained and reduces costs of replacing in economists ’ jargon, the extent to which potential supply is endogenous. this opens the possibility of there being “ multiple equilibria ”, something my colleague david miles has reminded us was a central message of keynes but that has been lost to much of the latest generation of new keynesian modelling. see “ monetary policy and forward guidance in the uk ”, a speech by david miles, available at : http : / / www. bankofengland. co. uk / publications / documents / speeches / 2013 / speech681. pdf. david reifschneider, william l. wascher, and david w. wilcox ( 2013 ). “ aggregate supply in the united states : recent developments and implications for the conduct of monetary policy ”, finance and economics discussion series 2013 – 77. board of governors of the federal reserve system ( u. s. ). http : / / www. federalreserve. gov / pubs / feds / 2013 / 201377 / 201377abs. html. see alina barnett, maria barriel, adrian chiu and jeremy franklin. “ the productivity puzzle : firm - level perspectives ”, bank of england working paper, forthcoming. bis central bankers ’ speeches particularly skilled employees as the recovery takes hold, the recovery could generate greater supply capacity and real wage growth as it proceeds. it would be unreasonable to expect these positive outcomes to materialise immediately. weak growth may have meant that companies have missed out on productivity advances that would otherwise have been made through learning by doing.