Good news – or bad?

The recruitment market remains buoyant. Many companies are finding it hard to recruit suitably skilled staff for available roles. 

As a result, at C9 Recruitment we are seeing high demand from clients – and are at the stage where we are recruiting more internal staff in order to keep our service levels as high as possible.

Good news or bad?

For the UK economy, news that would be seen traditionally as good, doesn’t appear to be that at all, in the present circumstances.

Let’s explain.

Inflation is economic enemy number one. We all see that every time we visit the supermarket – where prices are higher and there seems to be no real let up. Although the UK has recorded two months of slowing inflation, it is still around 10 per cent and it is uncomfortable. 

• Inflation creates a cost-of-living crisis and wipes out people’s savings. 

• It encourages higher wage claims – which in turn can fuel further inflation. 

• For companies that are unable to raise prices, because of market conditions, the only way to maintain profitability is to cut costs.

The well-tried approach to lowering inflation is for Governments and central banks to take money out of people’s pockets by raising interest rates, introducing higher taxes and cutting spending. Prices then come down.

The issue with this is a recession often follows. There is less spending and people lose their jobs. Bad for the rate of unemployment – but good for the rate of inflation.

But things seem different this time round,

Although interest rates have been raised quickly, the unemployment rate has remained low meaning the consumer has kept on appending. Some commentators are of the view that to get inflation under control, unemployment needs to be higher.

Also, it has been argued that this time it is harder to get inflation down as some of the causes are outside of the UKs control (rising energy prices, for example).

There could be several reasons for the low unemployment rate. 

It could be the historically low participation rate (the percentage of people of working age who are actually working or available for work). It’s no wonder the unemployment rate is low if there are less workers about (perhaps people not returning after the pandemic, or retiring early and drawing down savings accumulated throughout the lockdown.)

Interest rate rises act with a lag and nobody knows if rates have been raised too far already – and that the ‘cure’ for inflation will, in fact overshoot and drive the economy into a deeper recession.

In any event, the Bank of England look determined to keep pushing rates up (just to be certain of getting inflation under control).

If jobs markets continue to be strong – more restrictive action may well be on the cards.

A case of good news – being bad?

Here’s to 2023.