(47 Views) March 12, 2016 10:48 am |
Published by fbsaind |
The Cabinet of Dr Caligari
The somnambulist from “The Cabinet of Dr Caligari.”
There are two types of people in Britain right now. People who are asleep, and people who are awake.
The sleepers think that the economy has never been better. Jobs are up. Unemployment is down. Things are good. Most people, including you, are asleep.
And then there are the people who are awake. We call these people economists. They spend their time looking into the future, and mostly they see an economic slump coming. They are alarmed by it. That’s why the ECB reduced interest rates to zero last week.
But weirdly, it feels like we’ve never had it so good. Here is our current situation according to a great set of charts from Barclays:
Technically, we’re at full employment. Self-employment rates are high. The current employment rate is the highest since records began in the mid 1970s.
But economists don’t care much about the present. They want to know what’s going to happen next. And what they’re seeing is scary. The economy is slowing down, and many of the key indicators are in decline.
We’re sleepwalking into the next recession.
Scroll on for a scary look at the future …
Wages are up and hours worked are down. That’s a good thing for workers. It may even be holding back growth overall — ideally, you want everyone to be as productive as possible. But the fact that workers can reduce their hours while pay stays high In a low-inflation environment means this is as sunny as it gets for workers.
Job creation in the UK is fantastic right now — the bulk of new jobs are high-skilled, the kind that carry high wages, and high productivity. There are fewer low-skilled jobs being created. But that is pretty much the end of the good news because …
Trade is in decline. Exports are already negative, according to HSBC.
Future expectations in trade are down even more — it’s a sudden slump in expectations.
If investment goes negative we’ll be back into 2008 territory.
Consumers are usually the great rescuers of the economy. But consumer spending is cooling off.
Some more detail on that. Note that people have pulled back on shopping for non-food items.
Perhaps because they have exhausted their savings. Consumption has risen faster than income, leaving people with empty bank accounts. The safety cushion for future consumption is now limited, in other words.
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