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You can find the current article at its original source at https://www.theguardian.com/money/2017/oct/18/rising-inflation-cant-blame-the-workers-this-time-labour-market-interest-rates
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| Rising inflation … can't blame the workers this time | Rising inflation … can't blame the workers this time |
| (7 days later) | |
| Don’t blame the workers for the highest inflation in more than five years. That’s the message from the latest monthly snapshot of the labour market showing that earnings growth is stubbornly low despite the lowest jobless rate since the mid-1970s. | Don’t blame the workers for the highest inflation in more than five years. That’s the message from the latest monthly snapshot of the labour market showing that earnings growth is stubbornly low despite the lowest jobless rate since the mid-1970s. |
| Back then, any pick up in the cost of living would lead to a demand for higher pay, prompting an upward wage-price spiral. But this model is dead. | Back then, any pick up in the cost of living would lead to a demand for higher pay, prompting an upward wage-price spiral. But this model is dead. |
| Three things are worthy of note. Firstly, it is clear that the economy is great at creating jobs but hopeless at generating pay rises. Employment is up by more than 300,000 over the past year but average earnings growth at 2.2% is slightly lower than it was in the summer of 2016. | Three things are worthy of note. Firstly, it is clear that the economy is great at creating jobs but hopeless at generating pay rises. Employment is up by more than 300,000 over the past year but average earnings growth at 2.2% is slightly lower than it was in the summer of 2016. |
| Secondly, while employment has been a lot stronger than was feared in the run-up to the Brexit referendum, the pace of growth eased in the three months ending in August. | Secondly, while employment has been a lot stronger than was feared in the run-up to the Brexit referendum, the pace of growth eased in the three months ending in August. |
| Finally, there is no immediate end in sight for the fall in real (inflation-adjusted) wages which have now fallen for a sixth successive month. The Resolution Foundation notes that real average earnings are no higher now than they were in 2016. | Finally, there is no immediate end in sight for the fall in real (inflation-adjusted) wages which have now fallen for a sixth successive month. The Resolution Foundation notes that real average earnings are no higher now than they were in 2016. |
| It will be well into 2018 before pay growth overtakes inflation – and this relentless squeeze on living standards will have retailers nervous as the key Christmas period nears. Consumers face a choice: tighten their belts or get deeper into debt. | It will be well into 2018 before pay growth overtakes inflation – and this relentless squeeze on living standards will have retailers nervous as the key Christmas period nears. Consumers face a choice: tighten their belts or get deeper into debt. |
| An added complication is that the Bank of England appears to be gearing up for an interest-rate rise at the November meeting of its monetary policy committee. The feeling in the City is that a failure to raise rates will damage the Bank’s credibility and lead to a further fall in sterling. | An added complication is that the Bank of England appears to be gearing up for an interest-rate rise at the November meeting of its monetary policy committee. The feeling in the City is that a failure to raise rates will damage the Bank’s credibility and lead to a further fall in sterling. |
| But the pound could well weaken even if the MPC does go ahead with the rate rise because it will be doing so when – judging by the labour market and other recent economic data – there is no justification for one. | But the pound could well weaken even if the MPC does go ahead with the rate rise because it will be doing so when – judging by the labour market and other recent economic data – there is no justification for one. |