UK Perspectives: The Labour Market's Mixed Blessings
As we are all too painfully aware, the recovery in the UK is proving slower and more protracted than any recovery in the last 100 years, including the 1929 recession (See "Monetary policy and the damaged economy;' David Miles, external member of the Monetary Policy Committee, 24 May 2012). Even based on the somewhat optimistic Bank of England forecasts, the economy will likely not return to the level of output seen in 2008 until 2014. After borrowing growth in the form of excessive leverage, managing delevering in an orderly and socially tolerable fashion is a challenging task indeed. Inflation has consistently overshot expectations, remaining above target while output growth is probably flat, at best. That said, not all aspects of the post 2008 economic performance have been uniformly disappointing. The labour market has proven much more flexible than most dared hope, with weak real earnings growth more of an issue than unemployment. Indeed, the unemployment rate has held at a much lower level than it has done in previous recessions. This is reason for cheer.
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