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Has employment decoupled from the economy in the UK?

[Deleted User]

The UK unemployment figure reached 3.5% from June to August 2022.

On the other hand, the bank of England is spending billion rescuing the bond market so the economy is not in a great place yet unemployment is falling.

Has the UK decoupled the inverse relationship between the employment rate and how the economy is doing?

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banie01

The headline of full employment in the UK is very misleading. There are also a record number of vacancies. There quite a high proportion of those in work in receipt of universal credit and an even larger number on minimum wage and just outside the welfare net there. There is a large portion of the UK workforce on some form of in-work benefit. I remember reading a 40% figure, I'll try to dig it out.

The Tories have banged on about wage growth being their measure of success? But wage growth has been largely stagnant over the course of their time in Govt, and indeed placed against inflation? Has often seen wage decline.

On every metric? The UK economy is tanking and especially in the lower paid services, hospitality and light manufacturing roles. The employment headline number is decoupled in the sense that when an economy has a record number of vacancies? Particularly in professional & skilled roles that they cannot fill with domestic hires? That it is indicative of serious systemic issues with both education and workforce/demographic planning.

The removal of FoM and access to the EU's pool of qualified folk, has IMO been a nail in the coffin of Brexit Britain.

Yurt2

This has been going on for decades in the UK. Brits are getting materially poorer on average and an ever narrow strata benefits.

Lower quality jobs, falling real wages. Thousands of tax reliefs for large corporates. No-lose privitisation terms for utilities, transport and communications infrastructure where the state provides the investment and the owners extract the rent.

Brett Christopher's Rentier Capitalism book gives a very good deep dive on this.

If you're scared it's Marxist twaddle because of the title, his thesis is basically that the UK runs an economic model that is bad for capitalism itself (as it defines itself as an efficient model). It radically disincentives efficient use of capital and innovation, and radically priorities monopoly, rent extraction and sweetheart tax treatment for useless people that just just want to own assets to sweat into the ground until it collapses. Structural low-to-no-growth and low productivity results.

It has long been socially unsustainable, now we're reaching the point where it's economically and financially unsustainable. The UK has been economically cannibalising itself ever since the day Maggie darkened the door of number 10.

theteal

Yes don't let the Tory tag lines of record unemployment fool you. The flip side is the bigger issue i.e. the massive shortage of workers.

Yurt2

https://www.boards.ie/discussion/comment/119740182#Comment_119740182

Correction: There's a massive shortage of workers for sh*t work that doesn't pay to live.

They can open the tap on immigration, but that's one of the factors that got them where they are in the first place (not exclusively, but we know where it sits in the sad Brexit story).

joseywhales

We are in a pattern here. You have a huge labour shortage which leads to wage inflation which leads to inflation which leads to wage inflation which leads to inflation........same in the US. The central banks have to break this vicious cycle, the only way to do that will be a massive recession and job loses, a kind of reset. It won't be pleasant

Yurt2

https://www.boards.ie/discussion/comment/119740282#Comment_119740282

Inflation of the sort we're seeing isn't generated by higher labour bargaining power alone. In fact, it's one of the smaller component parts of it (borne out by Federal Reserve research in the US)

[Deleted User]

https://www.boards.ie/discussion/comment/119740282#Comment_119740282

You have read the post about real wages falling in the UK?

joseywhales

https://www.boards.ie/discussion/comment/119740303#Comment_119740303

Ah you are right!

I was thinking that the average corporation has about 2/3 to 1/3 split of labour costs/input, so the majority of this inflation must be coming from labour cost. But with real wages deflating, there's obviously a lot more to it, my bad.

[Deleted User]

I have family in the UK. It is a strange place in a lot of ways it's changed so much in the past 40 years, it's noticeably poorer than Ireland in some areas now, and in other areas fabulous wealth of the type, you don't see in Ireland, cities full of grimy chain restaurant and cheap takeaways I mean acres of them.

Wanderer78

https://www.boards.ie/discussion/comment/119740410#Comment_119740410

unfortunately we have implemented similar polices here to, but no where near as extreme as the us and the uk, its all coming to ahead now though, in most countries, including here, its truly showing itself here in relation to property, this approach is toast....

[Deleted User]

https://www.boards.ie/discussion/comment/119740282#Comment_119740282

Not the case at the moment. There is a massiveshortage of labour. The old raise unemployment to lower wage inflation won’t work. It’s the end of the 40year low inflation, low wage growth paradigm. How it ultimately plays out remains to be seen but we do stand to see a shift back in the fruits if economic output towards labour (workers) from capital (investors).

Inflation will ultimately be halted by a real fall in asset values as interest rates rise and not through wage stagnation as there simply are not enough workers at the moment

timmyntc

https://www.boards.ie/discussion/comment/119740324#Comment_119740324

real wages fall if inflation is greater than rate of wage growth - in a wage inflation spiral (not that we are in one) real wages still do fall overall.

Inflation always wins out

donaghs

https://www.boards.ie/discussion/comment/119740303#Comment_119740303

It shows the alternative "right-wing" view on immigration. i.e. bring more people in to provide a pool of labour and keep payroll costs down.

Despite getting elected to do this opposite, there seems to be a push on the new government from supporters/donor for "extra immigration".

Kwasi Kwarteng gives himself three weeks to come up with debt-cutting plan | Financial Times

It not a headline story in itself, and you have to search for it in articles.

banie01

https://www.boards.ie/discussion/comment/119742552#Comment_119742552

Kwasi's 3 weeks have ended very prematurely as he's been sacked. The markets have roundly rejected the free market libertarianism at the heart of the Tufton St/No10 shítshow.

Dyr

https://www.boards.ie/discussion/comment/119740410#Comment_119740410

Not to worry, we're doing our best to catch up.