Davy Research

Market comment

UK pay squeeze continues

DAVY VIEW

The latest UK labour market release showed unemployment down to a fresh low of 4.3% and employment at a record high. However, wage growth was unchanged at 2% and well behind inflation at 2.9%. UK households are set to be squeezed further in the coming months as inflation accelerates. The wage puzzle is explained by the exceptionally weak recovery in productivity, while the level of underemployment in the UK labour market is still well above its pre-recession rate.

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