- Unemployment in the UK just fell — again — to an amazingly low 5.4%.
- And employment rose — again — to an amazingly high 73.6%, which, as my colleague Mike Bird points out, the highest level in modern history.
This is as good as it gets.
This economic period in the UK is right in the sweet spot, especially for workers. The stock market has taken a dip recently, but if you get your income from working rather than investing, then you’re in heaven.
We’re technically as close to “full employment” as we can get. (If you’re unemployed right now it’s probably because you choose to be, or you’re between jobs, or you have some mental/health issue that prevents you from holding down a job.)
Unemployment could sink lower, but that would likely trigger disastrous runaway inflation: If there are zero extra available workers for employers to choose from, then any given available worker can name their price.
But as we noted recently, employers are giving in and awarding higher wages to workers. The new National Minimum Wage will raise pay even further.
You can see something similar happening in tech right now — an industry that has fewer qualified workers than are needed: In London, one software engineer received 73 calls in a single day from recruiters when his CV was posted online. Entry-level salaries have doubled and are heading toward £50,000 ($US77,000). In San Francisco, new hires generally start above $US100,000 £65,000) and can get up to $US200,000.
So enjoy it while it lasts, Britain, because it will not stay this way forever and the signs are we’re at the top of the rollercoaster — the bit right before that stomach tossing first plunge downward.
First, there are signs that the equity markets are becoming so frothy and overvalued that people are simply expecting them to go into a sharp correction. Here’s what the bubblicious tech sector looks like right now:
The UK property market also looks like a bubble, inflated by low interest rates, which are currently near zero.
The ECB, the central bank responsible for creating this bubble, has literally called it a bubble: In the words of the bank official who said it, the ECB’s QE programme has caused “the risk of house price bubbles” in London and other EU cities, where property is now “becoming increasingly overvalued.”
At the same time, China, the largest economy on the planet is certainly going into a slow growth period and it may be even worse than that. Some sectors — like certain types of construction — are clearly showing signs of decline. That will have global knock-on effects that will be unpleasant for everyone.
There is only one thing that is guaranteed to happen when the economic cycle peaks like this.
Maybe not today. Maybe not tomorrow, but soon. And it won’t be pretty.
There are only two rational responses to this:
- Enjoy it while it lasts.
- Start saving for a rainy day.