Wednesday, 16 January 2008

Where is the recession?

While everyone might be expecting a recession, there is surprisingly few sign of one in recent economic data. Today, three numbers came out; all indicating that the UK labour market was in fine shape.

First item; unemployment. The number of people out of work was just 1.65 million. It is now at a 32 year low That is genuinely great news, since there is nothing sadder or more painful than unemployment.

Item two; employment numbers; the numbers are strong. The number of people in work increased by 175,000 in the laste quarter to 29.3 million. It is at the highest figure since 1971.

Finally, wage growth - average earnings growth, including bonuses, are chugging along at 4 per cent. No sign of a slowdown there.

These numbers, along with other recent numbers, like the rather perky third quarter GDP numbers, and dreadful recent inflation numbers, all suggest that the economy has not yet slipped significantly. In fact, the only numbers that looks weak are those from the housing market.

There is a danger here for the MPC. Aggressive interest rate reductions while the labour market remains tight might only fuel inflation. It won't however, do much to save the housing market. That wreck is beyond saving; house prices have drifted so far from fundamentals that that only way is down.

1 comment:

amigauser said...


You obviously do not know anyone who is unemployed.

The unemployment number is being manipulated by people being put on training schemes, part time (15hour) jobs, incapacity benefit and people are beginning to work in the black market more.

I suspect that the unemployment rate will be allowed to show an increase in the coming months, thus giving the Bank of England a credible reason for cutting interest rates.

Thus, the Bank will be able to bail out its friends in the city of London, whilst pretending to care about the man in the street.