Unemployment falls, pay rises

by davidcurtisgeorge

Statistics show that the average pay for UK workers is now higher than inflation, according to the Office of National Statistics (ONS).

Figures released today show that wages – excluding bonuses – increased by 1.3% in September, whilst the Consumer Price Index was at 1.2%. This, in conjunction with unemployment falling by 115,000 from July-September, further evidences an economy which is slowly improving.

Unemployment is now at 1.96 million, its lowest since October 2008.

Could this be the start of an economic boom for the UK?

Ever since the Global Economic Crisis began in 2007, inflation rates (CPI) have been greater than UK average earnings. The reasoning for this is twofold; the increasing unemployment at the time meant that less people were earning an income. Secondly, the average earnings of the UK public decreased as firms reduced their pay, in order to cut costs.

However, with these recent statistics, it is clear that the UK economy may have finally recovered from the devastation that began seven years ago, restarting the economic cycle.

The economic cycle is a perpetual four-stage process, which tracks the rise and fall of an economy. The stages are as follows:

• Recession
• Recovery
• Upswing
• Downswing

‘Upswing’ refers to the stabilisation of the economy, with growing confidence in the market and low interest rates. This will eventually peak at an economic boom (the last example in the UK being the Lawson Boom of the late 1980s) whereby commodities and shares skyrocket; eventually this will crash and lead to a downswing, causing another recession.

It would seem from this theory that the UK is starting to hit the ‘Early Upswing’ stage – we have been in the recovery process of low property value, and are now beginning to grow again.

However, whether or not the economy can be controlled, as to break the cycle and avoid another recession, remains to be seen.