Nearly five years after the recession ended, the economy has finally returned to its previous peak. The 0.8 per cent increase in GDP between April and June means that all of the lost output from the crash has now been recovered – and a little bit more (the economy is now 0.2 per cent larger). We’ve never had it so good, you might say (as Harold Macmillan did in 1957).
Well, not quite. For a start, it’s taken the UK more than four years to reach this point: the slowest recovery since the 1870s. By contrast, the US, where the Obama administration avoided many of George Osborne’s errors, is now 6.3 per cent larger. And while the economy is bigger than ever, most people aren’t any better off. GDP per capita (which takes into account the growth in population since 2008) is still more than 5 per cent below its previous peak. The cake may be slightly bigger, but there are many more mouths to feed.
The uncomfortable truth is that, for most people, the recovery hasn’t even begun. After briefly drawing level with inflation earlier this year, nominal wages increased by just 0.7 per cent in the three months to May (while prices rose by 1.5 per cent), the slowest rate since ONS records began in 2001. So weak has earnings growth been that average wages aren’t forecast to return to their pre-recession peak until 2018, while median wages will take even longer to recover.
Employment is close to a record high, but too many people are stranded in low-wage, low-skill jobs that don’t pay them enough to maintain adequate living standards. For them, even as GDP continues to expand, years of depressed pay lie ahead. It is this that means that while the Conservatives boast about the recovery, Labour’s “cost-of-living” attack will retain its potency.
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