Understanding the economy

The latest economic data can appear pretty confusing, if not contradictory.

Yesterday the Consumer Prices Index (CPI) fell from 2.7% to 2.2%, the lowest level for a year. This apparent good news was largely driven by fuel price cuts as supermarkets engage in a price war. Reductions in fuel prices will help some UNISON members. However, many more will be concerned about the 4.3% increase food prices and that household energy price increases, of up to 10%, are not included in these figures. These are not discretionary costs and are all well above the typical 1% increase in pay.

The Bank of England’s quarterly inflation report has raised growth forecasts, but it still doesn’t expect unemployment to fall below 7% until next year. That is significant because that’s the earliest they will even consider raising interest rates. Mortgage cost increases are something else UNISON members don’t need at present.

Today’s jobs data shows that Scotland is -0.2% below the 2008 peak. So after more than 5 years of austerity economics we are almost back to where we were in terms of the number of jobs. The UK is still doing slightly better, having already attained its pre-recession peak, but with 75,000 jobs created in Scotland over the past year, jobs growth was faster here than anywhere else. However, unemployment increased in Scotland by 1,000 while it fell across the UK. The numbers of inactive are falling and this may mean that better job prospects are attracting more workers back into the labour market. The number of full time workers in Scotland is still some 7% below the pre-recession peak.

So in summary, there is some good economic news. However, wages are still being squeezed and that won’t help create a sustained economic recovery. While new jobs are being created they are still part-time and less secure than before the recession.

Further reading.

The TUC’s Duncan Weldon has published ten charts to help understand the economy. This is very good.

Brian Ashcroft explains what’s happening in the Scottish jobs market.