What can Reeves do about Britain's labour shortage?

Unemployment down. People in work up. Wages rising faster than inflation. What’s not to like, as the phrase goes?

- SEAN O'GRADY

Well, the truth is that the latest readings on the state of the UK labour market are certainly not bad news, as such, but neither do they indicate that the country is set for a rapid round of interest-rate cuts, let alone that much-needed boost to economic growth that everyone would love to see.

The basic picture is still of wage inflation that is still too high for comfort, and an acute shortage of labour in general, as well as of workers with specific skills. The chancellor, Rachel Reeves, is certainly not in a celebratory mood: “There is more to do in supporting people into employment ... This will be part of my Budget later in the year, where I will be making difficult decisions on spending, welfare and tax to fix the foundations of our economy so we can rebuild Britain and make every part of our country better off.”

So is this evidence of ‘the worst set of economic circumstances since World War Two’?

Reeves has often complained about the mess she is having to clear up, but it’s obviously not as dire a situation as that encountered by, say, the Labour government in 1974, or the Tories (more arguably) in 2010, because the economy is, despite everything, more competitive and robust. She does have a stronger case about the parlous state of the public finances and national debt – and those affect the “real economy”, too.

On balance, given poor long-term trends in investment and productivity, Reeves is right to worry about Britain being trapped in a semi-permanent “doom loop” of low growth, high taxes and spiralling debt.

What is the outlook for inflation?