Besides the continuing over-dependence on the service sector, wages are stubbornly refusing to rise as they have in previous periods when unemployment fell. This has two bad effects on the budget deficit: benefits to the low-paid continue to flow, where they would normally taper off, and the increased tax take from "wage push" has not materialised. This is presumably a factor in the unexpectedly high figure for government borrowing.
Saturday, 26 July 2014
The news that the UK economy had expanded to a level slightly above that of the 2008 peak was confirmation of the confidence created by the coalition government in 2010. It is not the end of the story, though. This comment on the Guardian blog on the matter is typical of the warnings: