11 Downing Street is home to Chancellor of the Exchequer and where the budget is drafted

An economy in turmoil?

So far in June every piece of news seems to have been reporting record highs or lows in economic data. Interest rate rises, low unemployment, rising inflation, high job vacancies, negative wage growth and slow or negative GDP growth tell their own stories but collectively give a very mixed picture pointing to a faltering economy.

Employment and vacancies

Positive news around historically low levels of unemployment and record numbers of job vacancies (topping 1.3 million in May) individually would be welcomed, but together they identify a clear imbalance in the labour market. Furthermore, analysis shows that the skills and demands of those seeking work and the jobs available offer a further mismatch meaning that the vacancies are likely to remain unfilled and continue to increase.

It would appear that both Brexit and Covid have had a significant impact on the jobs market. High retirement levels during the pandemic were not matched by a similar rate of replacement. And then there’s the tricky subject of working hours, location and conditions. What was meant to be a short term and protective move home actually became a cultural shift with even long serving, hardened commuters becoming fans of remote working, limited travel and a more flexible approach to working hours. This does not help employers recruit for roles which require on the ground, in person attendance on a full time basis.

The reduction in overseas workers that Brexit and Covid also created has created an obvious gap in the market, especially around skills. In particular, sectors such as agriculture and tourism appear to be struggling to recruit both permanent and temporary workers.

A Recession on the way?

Further news followed of a flat lining in GDP which in itself would not necessarily be a reason for concern. But in this instance the picture was the same across all sectors. Normally as the economy ebbs and flows at least some sectors will continue to report an increase in revenues, offsetting reductions in others. But the stalemate across the board could signal bigger problems ahead.

With inflation continuing to rise month on month and expected to break 10% in June, spending is forecast to fall as wage growth fails to keep pace and disposable incomes shrink in real terms.

All these signals could be a read as a pointer towards a looming recession but the sporadic and turbulent global economy means that is far from certain, with many analysts expecting more of a bumpy road over a protracted period, rather than a significant or sharp decline in GDP leading to a recession.