Unemployment is rising, but much less than feared a few months ago. Next week’s numbers could show that the official unemployment rate has edged up to around 5.3 per cent. The Office for Budget Responsibility expects it to peak at around 6.5 per cent – which is far below the 10 per cent-plus rate it feared last year.
For investors, however, this prospect is not a happy one. Lower unemployment means there’s less spare capacity in the labour market and hence less room for growth without inflation.
How big a problem is this?