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Rising unemployment could be a good thing

20 Apr 2016

Television camera in a television news studioCommenting on the latest labour market statistics, James Sproule, Chief Economist at the Institute of Directors, suggested that the simultaneous rise in both employment and unemployment was not as contradictory as it might seem:

“The UK economy continues to power ahead, with the rise in employment and unemployment showing that employment is buoyant enough to attract the long-term inactive back into the job market. Getting people who have fallen out of the labour market looking for work again, combined with migrants bringing their skills here, is a key part of the UK’s continued economic expansion.

“These figures will no doubt be pored over in an attempt to discern effects of the EU referendum, but how employment would fare in the event of a Brexit vote is an open question. What is clear, however, is that it would be extremely good if other EU economies were able to generate jobs at the rate the UK achieves.

“The rise in earnings is also welcomed, making a consumer-led recovery all that more sustainable. The introduction of the National Living Wage has raised pay for many low earners, raising the potential for inflation to push up towards the Bank of England’s 2% target.

“Finally it should be remembered that unemployment is traditionally a lagging indicator, so not reflective of any forecast economic weakness of the sort highlighted by the IMF earlier this week.”

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