Wednesday, October 16, 2013
The UK labor market report continues to be a seemingly mixed bag. On the one hand, employment growth continues to be strong, with the number of employed increasing in June-August by 0.5% compared to the previous quarter and 1% compared to June-August 2012.
However, average earnings continues to fall in real terms. In nominal terms, average weekly pay rose only 0.7%, which considering the 2.7% inflation rate implies a 2% drop in real earnings.
This in turn implies a 2% drop in aggregate real labor income.
Despite the employment increase, these numbers therefore contradict rather than confirm the story of a strong British recovery that certain British pundits asserts has started.
Employment is growing, but not because more is produced, but because British workers are willing to work for less and less.