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Evening Standard Comment: The signs of economic recovery are there, but the Chancellor still has plenty to worry about

·2-min read
 (Christian Adams)
(Christian Adams)

Neither the weather nor the rise of the Indian variant is bringing much springtime cheer, but the economy is starting to show green shoots of recovery.

Figures from the Office for National Statistics show that the number of payroll workers rose by 97,000 between March and April this year, while job vacancies also jumped as the lockdown eased.

It is hugely encouraging that the jobs market appears to be recovering even as a fairly strict lockdown remained in place. As we open up further — the Indian variant permitting — we should see additional employment and economic growth.

As ever, there are reasons to be cautious. The closure of the furlough scheme, scheduled for the end of September, with employers making a contribution to workers’ salaries from July, is likely to lead to a rise in unemployment as some workers are laid off.

We should also not forget that the jobs market remains far below its pre-pandemic level, with 772,000 fewer people in work today.

Furthermore, many businesses that have been kept on life support by low-interest, government-backed loans — some of which have been termed “zombie companies” — may not find a route to viability once such support is withdrawn.

It will also be critical to look at wage growth. Average wage growth at present is largely a result of the pandemic which disproportionately hit the jobs of the lower paid.

Wages may have to rise to lure workers back into the hospitality sector, yet many of those businesses, badly hit by repeated lockdowns, cannot afford to pay those higher salaries.

Then there is the spectre of inflation. A stronger than expected recovery could rekindle fears of an overheating economy, led by a booming US economy.

The UK is predicted to grow by 7.25 per cent this year — the best in 80 years. But with fears from economic scarring to inflation, and longer-term issues around productivity, demography and Brexit, there is still plenty for the Chancellor to worry about.

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