just before the pandemic, and still slightly above the mpc ’ s existing estimate of the long - run “ natural rate ” of unemployment, other indicators point to a much tighter labour market. some survey measures of labour availability are at their lowest level at least since inflation targeting began ( chart 14 ). vacancies are at a record high ( the official series began in 2001 ). both suggest a tighter labour market than you ’ d normally expect at current levels of unemployment. chart 13. unemployment has surprised to the downside in recent months per cent chart 14. survey measures point to tighter labour market than unemployment alone would suggest 5. 2 wage growth ( rhs ) 5. 0 4. 8 4. 6 data 4. 4 august mpr forecast 4. 2 jan feb mar apr may jun jul 4. 0 aug sep sources : ons and bank calculations. staff availability ( lhs, inverted ) 99 01 03 05 07 09 11 13 15 17 19 21 indices : 50 = no change on the previous month. wage growth series weighs together the ‘ permanent staff salaries ’ and ‘ temporary staff pay rates ’ indices according to the shares of permanent and temporary employees in the labour force survey. sources : kpmg / rec uk report on jobs, ons and bank calcs. over the cycle, there tends to be a reasonably stable – and inverse – relationship between vacancies and unemployment, known as the “ beveridge curve ”. in an upswing, vacancies rise and unemployment declines. but in recent months, at least relative to the pre - pandemic curve, the former has clearly outstripped the latter ( chart 15 ). the labour market looks to be having a harder time clearing – ensuring matches between available workers and available jobs – than it used to. what ’ s causing all this? as far as the decline in unemployment is concerned, one possibility is that a disproportionate number of those who ’ ve lost jobs ( or failed to find one in the first place ) have quit the labour all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice market altogether. we know that inactivity rose significantly last year. but participation in the labour market is typically cyclical – chart 16 plots annual changes against those in employment – and i don ’ t see anything that unusual here. participation has been returning alongside the recovery in the labour market.

secular fall in liquidity ratios ( chart 3 ). in the language of insurance, the excess on the central bank policy needs to be raised materially. the fsa ’ s proposed new liquidity regulation provides a good starting point. 21 second, central bank liquidity insurance frameworks need explicitly to recognise the possibility of drastic times requiring drastic measures. the key is to prevent such drastic action becoming disorderly on the one hand, and permanent on the other. the first can be achieved by having a pre - defined framework which recognises the need for abnormal liquidity provision, whether in size, collateral quality or term. the second can be achieved by setting prices ( fees and collateral haircuts ) for liquidity provision which discourage abnormalities from becoming regularities. the bank of england ’ s new sterling monetary framework, announced last october, seeks to apply those principles in practice. 22 • time - consistent deposit insurance : deposit insurance schemes have been stretched in many countries, to the point of offering blanket coverage of retail deposits. those actions are already damping the risk senses of depositors, who have rationally reacted by seeking out the highest - yielding accounts. this has contributed to a competitive frenzy in the retail deposit market. in the uk, retail deposit rates have risen over the past year from 100 basis points below base rate to 100 basis points above. in general insurance markets, distorted risk choices are guarded against by sharing the risk between insurer and insuree, ex - ante ( through risk - based premia ) or ex - post ( through co - insurance devices ). deposit insurance regimes in some, but not all, fsa ( 2009 ). bank of england ( 2008 ). countries have such features. in the uk, deposit insurance premia are not riskbased. private risk incentives would be better aligned with the public good if the uk ’ s deposit insurance regime had such a feature. • time - consistent capital insurance : in historical terms, capital insurance to the banking system is the newest of the state support mechanisms for banks. partly for that reason, its framework is least well advanced. indeed, give or take, there is no framework at present. whether one is needed will depend importantly on the levels of private capital held in future by the banking system – the degree of self - insurance. that debate has some distance still to travel. but there are complementary measures which could serve a similar purpose. for example, some academics have proposed private sector capital insurance schemes, funded ex