From the RBS Chief Economist’s Weekly Briefing.
As far as the jobs market is concerned, we’ve rarely (if ever) had it so good. Yet the link between jobs and pay remains severed. This is unlikely to reunite until productivity improves. And with that, there are few quick fixes.
Rude health. The last time the British labour market was in such good shape Tammy Wynette was standing by her man. In the three months to June employment was up by 340,000y/y taking the employment rate to a record 75.1%. Unemployment was down by 160,000y/y and the rate fell to 4.4%, its lowest level since 1975. The number of job vacancies slipped a little but there have never been fewer people chasing each job since these records began in 2001. We’ve rarely had it so good.
Tough love The only good thing to say about the UK’s productivity performance between April and June (down 0.1%) is that it was worse between January and March (down 0.5%). Without wishing to be Jeremiah-ish, while full employment provides short term support for the economy, long term prosperity relies on productive advancement. Without it, the economic cake might continue to grow but individual slices may not. The data tell a hard truth. We produce no more per hour of work than in 2008 and only slightly more than we did in 2003. Perhaps stagnant real pay growth is not so unjustified.