Unemployment down and inflation declining but real-life wages are falling…

Unemployment figures down

According to a recent report by the British Chamber of Commerce, things – on the face of it – are

looking good for the UK economy.

In the three month run up to August last year, unemployment fell by 154,000; this is the first time since 2008 that these figures have been under the two million mark.

The latest QES also reported that there has been an improvement in employment balances for the services and manufacturing sectors.

All in all, the latest UK job reports do confirm that the market is a “source of strength for the UK economy”.

Inflation decline

It is also a fact that CPI inflation dropped 1.5% in August 2014 from 1.5% to 1.2% in September – this represents the lowest rate since September 2009 and is the ninth successive month that the Bank of England’s inflation target has been beaten.

Sea fares, air fares and a general fall in transport costs and lower prices of general recreational goods have been large contributors to the inflation drop

The latest QES does suggest that higher inflation could still be a risk as price rises are expected going forward.

Fall in real wages

Despite the inflation drop in September, the price rises around us continue to surpass earning growth – hence the “real wage” continuing to drop.

The CPI inflation reading in September was 1.2% - this is almost double the latest overall pay rise figure of 0.7%.

Because of this, in real terms, average earnings are actually falling by 0.5%.

Around two thirds of UK economic growth is dependent on consumer spending, so if the real wage growth decline trend continues, this could represent a real risk to the recovery of our economy.

Are you concerned about the economy or is your business doing well post-recession? Whatever your query, Omni Chartered Accountants are here to help – contact us today and let us know your thoughts on Facebook and Twitter!