Labour markets

“Recovering wage competitiveness in the short-run must depend largely on containing and, indeed, reducing nominal wage rates.”

This from Patrick Honohan, Ireland’s central bank governor, in an advance copy of a speech he will give today to the British-Irish Parliamentary Assembly, seen by Reuters. “Achieving lower nominal wage rates is not easy. But it is undoubtedly an essential component of a pro-employment recovery strategy for Ireland.” Read more

Official figures show Britain’s economy has contracted by almost 6 per cent this recession; the US economy by only 3.2 per cent. Yet the employment declines have been much smaller in the UK: OECD figures suggest British employment has fallen only 2 per cent , compared with 4.5 per cent in the US. As the chart from the Office for National Statistics shows, UK employment stopped falling around May this year, some seven months ago.

We have blogged frequently on these enormous transatlantic labour market differences. Ralph has explained the European Central Bank’s concern that short-time working schemes in continental Europe explains much of the difference, but that argument does not apply to the UK, where there have been no such schemes. Read more

More encouraging unemployment figures from the UK exacerbate the divide between most European labour markets and that in the US this recession. There are many possible explanations writes Chris Giles of the Financial Times, but the result must be a more optimistic Bank of England when it examines the prospects for recovery. Read more