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| Inflation and the UK job market |
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| Latest Recruitment News - HR and Recruitment Legislation News |
| Written by DirectNews Feed |
| Monday, 24 May 2010 00:00 |
 Any increase in the level of inflation is automatically regarded as a major negative for all sectors in a country's economy. As inflation rises, so does the cost of living. Everything, from household bills to food and drink, becomes that little bit more expensive as every market readjusts to the new level of inflation. Earlier this week, both the consumer price index (CPI) - which is the UK's official measure of inflation - and the retail price index (RPI), which is generally seen as the more accurate barometer as it also includes house prices, both rose significantly. The CPI increased by 0.3 per cent to a level of 3.7 per cent for April, in comparison to 3.4 per cent one month earlier. This represents a rate not seen for 17 months, when the economic turmoil that enveloped Britain and the rest of the world was at its peak. Meanwhile, the RPI indicates that inflation in the UK has risen from 4.4 per cent in March to 5.3 per cent in April, the highest rate seen on that index since 1991. However, despite the doom and gloom over the adverse effects that inflation hikes have on any economy, it must not be overlooked that this rise is seen by many experts as a temporary measure - it is by no means expected to have a major impact on the long-term financial health of the country. Also, there are suggestions that the increase may act as a catalyst for employers up and down the country to start re-introducing pay rises after several years of salary freezes. For example, the Confederation of British Industry (CBI) moved to reassure investors that interest rates will not be upped significantly in the short-term, even though it expects the higher levels of inflation to be retained for the next few months as energy prices continue to climb. Ian McCafferty, CBI chief economic adviser, said: "Inflation is expected to fall back below target within the coming year as relatively weak demand and spare capacity constrain price increases and this data should have little bearing on the short-term path for interest rates." Meanwhile, the Bank of England's monthly report on the health of British business - which involves it quizzing company leaders throughout the country - showed encouraging signs in April, with many firms displaying "tentative" signs that increases in wages may be brought back in the coming months as the UK continues its recovery following the recession. Therefore, although this week's news about inflation clearly cannot be regarded definitively as 'good news' for the UK job market, it may not be as bad as it first appears. Posted by Daniel Frost 
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