Clouds still hover as Britain gets back to work

While the Bank of England will welcome a sharper-than-expected fall in UK unemployment, low productivity growth and negative real wages present a more sober picture for the broader economy.

Mixed labour market indicators provide a confusing picture for Britain. Can its recovery remain on track when real wages are on the decline? Lower unemployment suggests that higher wage demands could be on the horizon, but for the now it gives the Bank of England some breathing room to keep rates at 0.5 per cent when it meets in July.

The UK unemployment rate fell to 6.6 per cent in the three months to April, from 6.8 per cent in the October quarter, and is now at its lowest level since December 2008. This figure beat market expectations for a more modest decline.

Graph for Clouds still hover as Britain gets back to work


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