Investment Clock insights

Expect real income squeeze despite record employment rates

Ian Kernohan

15 February 2017

The latest Labour Market Report showed no change in the rate of unemployment, which remained at 4.8%, while the employment rate (the proportion of people aged from 16 to 64 who are in work) was the highest since comparable records began in 1971. 

There was little sign of improvement in wage growth, and with inflation rising, we expect real household incomes to be squeezed this year.  This will have a negative im pact on consumer spending and overall GDP growth, unless households choose to look through the spike in inflation and allow the proportion of money which they save to fall further. These figures tend to support the Bank of England’s view that there is still some slack remaining in the labour market, and therefore a hike in interest rates looks unlikely.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice