Video report by ITV News Correspondent Richard Pallot
Covid-19 has taken a toll on the UK economy, with GDP set to tumble even further.
The uncertainty over new coronavirus variants and people's potential worries over going out once restrictions begin to ease mean the economic landscape is uncertain and its future hard to predict.
To chart a course through these stormy times for the economy, the Bank of England has published its quarterly Monetary Policy Report.
Here’s what is says about the shape of our economy for jobs and spending in the coming months.
When will the job market return to normal?
It’s hard to tell exactly when we will be back to pre-Covid levels but the chances are it will get a bit worse before it gets better.
The unemployment rate rose to 5% in the three months to November, meaning 1.72 million people were unemployed, but that figure may be held down by the softening effect of the furlough scheme.
The Bank of England reports that, over the first quarter, around 4.5 million employees are assumed to be furloughed, on average.
While most are “judged likely to return to work”, the report does warn “some jobs are likely to be lost.”
“As job support schemes are unwound, and as activity recovers, most workers are judged likely to return to work, although some jobs are likely to be lost.
The report projects the unemployment rate to rise to 5.5% in the first quarter of 2021, before peaking at around 7.75% in the middle of the year and then easing to 5.7% in the first quarter of 2022.
The Bank predicts it will then decrease to 4.5% in the first quarter of 2024 – which would still be off the low unemployment rate of 3.85% in 2019.
Can we expect a surge in spending?
People will have money left to spend once the economic recovery comes and this graph below shows why.
That’s £125 billion in excess savings.
But that may not all come at once, as the report refers to an Ipsos Mori survey published last month that suggests more than one-quarter of people expect to spend less once restrictions are lifted compared to before the pandemic.
That’s because some will remain cautious about going out, but this effect is expected to fade towards the end of 2021.
And what about GDP?
The result of more spending will be an increase in GDP, which is considered the main measure of the size of the economy and wealth of a country.
While activity is expected to fall in the first quarter of 2021, the vaccination rollout will mean “GDP picks up strongly” during the year, the Bank predicts.
The UK’s GDP is projected to reach its 2019 level by the first quarter of 2022.
“Over the second and third years of the forecast, GDP continues to grow, but the pace of growth slows,” the report adds.
“Over that period, the boosts to demand from easing health risks, reduced uncertainty and government spending fade.”