"We've seen the supply of new workers increasing and that is unusual: normally in a recovery we'd see just the demand for labor increasing, and that drives up employment and wages together. But because this time supply and demand has risen, real wages have fallen."
- Peter Spencer, the ITEM Club's chief economic adviser
Britain's unemployment rate and a claimant count change will be highlights of this week, as both indicators can have a major impact on the direction of the Sterling. Amid economic amelioration, the number of unemployed people has been posting sharp declines, and another steep drop is expected, with a December estimate of –32.3K. Moreover, the unemployment rate is likely to edge down to 7.3%, moving closer to a threshold level of 7%, at which the BoE promised to pull the trigger. The last but not least, average earnings index is projected to rise, climbing to 1.1%, from 0.9% a month earlier.
The economy and the labour market in particular are on the mend, this is not a question anymore. A survey conducted by the Ernst and Young ITEM Club showed the growing number of immigrants, pensioners and a series of cuts in benefits will transform British workforces over the next two years and will keep real wages around the current level. The total number of people available to work would grow by almost one million by 2015, mostly because 400,000 older people will still be working due to the phasing out the default retirement age of 65 years. Regarding the pace of growth of real wages, it is likely to keep in line with inflation growth this year, before gaining momentum again in 2015.
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