SINCE the recovery gained speed, opposition politicians in Britain have taken pleasure in accusing the government of overseeing an economy based on long hours and low pay. Between 2008 and 2014, the number of Britons in work rose by 2m. But average weekly earnings fell by 8% in real terms, in spite of a rise in working hours. Economists have labelled this the “productivity puzzle”, referring to the fact that, in spite of an otherwise strong recovery, output per worker per hour has fallen.
But there are now signs that these job-market trends are going into reverse. At first glance this may not appear to be unalloyed good news. After several years of rapidly falling joblessness, figures published by the Office for National Statistics on August 12th showed that unemployment grew by 25,000 in the three months to the end of June, to 1.85m. Worse, the number of people in work fell by 63,000 over the same period. That decline, which started in January, has lasted longer than any since the recovery began.
Yet there was better news on the wages front. After years of stagnant earnings, Britons are now getting a pay rise. Wages rose by 2.4% year-on-year in the second quarter. That appears to be fuelled by productivity rising overall, says Michael Saunders at Citi, a bank. During that period GDP rose by 2.6%, while Britons spent 0.2% less time working. This...Continue reading
via Brian Rushton, Silver linings
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