suggested that unemployment has continued to fall back a little from its peak, it has not moved much. and nominal regular pay growth ( which strips out bonuses, but includes merit related increases in pay ) has remained subdued over the past year, averaging around 2 %. assuming that the potential growth rate of the economy has not been damaged by the financial crisis ( and there is no compelling evidence to suggest that it has ), then this level of wage growth would be too low to be consistent with the inflation target in the medium term. looking ahead, it is most likely that there will remain a reasonable margin of slack in the labour market, which should help contain any pressure on nominal wages and hence price inflation. but this is unlikely to persist indefinitely. historical analysis of the uk labour market shows that the longer individuals are unemployed, the lower their chances of getting a job become. hence, persistently high actual unemployment tends to be followed by an increase in the level of structural unemployment. theory and empirical evidence predict that the structurally unemployed exert less downwards pressure on wage inflation. major shifts in the pattern of employment – as we are likely to see from the shifts in growth from services to manufacturing, and from the public to private sector – tend to reinforce that effect. if structural unemployment rises sufficiently, then the downwards pressure on inflation from spare capacity will eventually start to dissipate. for now, contacts of the bank ’ s agents confirm that the margin of slack in the labour market should continue to restrain wage growth in the coming months. in my view, that should continue for the next few years, even if structural unemployment begins to rise : the latter is a relatively slow process. given the inflation outturns so far in 2011 and the prospects for nearterm inflation outlined in the may inflation report, the squeeze on household real incomes is likely to be intensifying in the short term. overall, it could be quite some time before we start to see rising real take - home pay. the marked decline in household confidence since the start of the crisis might also have played a role in the weakness of consumer spending during 2010. for a given level of income, households may decide to spend less ( and hence save more ) if they are uncertain about the outlook for the economy and, especially, about the security of their job. although survey measures suggest that households ’ unemployment expectations have fallen slightly, bis central bankers ’ speeches the fiscal consolidation now underway might encourage greater precautionary savings among some households – indeed,

, either organically, or through the isda protocol. the message remains clear : those who can transition away from libor should do so on terms that they themselves agree with their counterparties. conclusion libor transition is challenging. it has been embedded in the financial system for a number of decades across a broad range of products. but we are moving away from libor and the problems of libor. this means facing up to transition now, taking action to ensure new issuance moves to robust alternative rates and concrete plans are in place to deal with https : / / www. parliament. uk / business / publications / written - questions - answers - statements / written - statement / commons / 2020 - 0623 / hcws307 / all speeches are available online at www. bankofengland. co. uk / news / speeches legacy exposures. the uk government announcement on its intention to legislate and the finalisation of the isda protocol are important steps in the ‘ endgame ’ becoming clearer. there is more to do and work is underway to remove the remaining barriers to transition. after john has spoken we ’ ll be joined by the chairs of the uk and us industry groups who continue to lead this work, building consensus on key areas such as product conventions and cash fallback mechanisms. hopefully, the message is now clear to those who have remained on the side - line : this is a necessity not a choice and there are eighteen months left to transition. and, for the avoidance of doubt, i ’ m taking it that eighteen months in libor is past the middle of the seventh, so you don ’ t need to get up now, stretch and sing ‘ take me out to the ball game ’ before john speaks. all speeches are available online at www. bankofengland. co. uk / news / speeches