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UK Perspectives: The Labour Market's Mixed Blessings
As we are all too painfully aware, the recovery in the UK is proving slower and more protracted than any recovery in the last 100 years, including the 1929 recession (See "Monetary policy and the damaged economy;' David Miles, external member of the Monetary Policy Committee, 24 May 2012). Even based on the somewhat optimistic Bank of England forecasts, the economy will likely not return to the level of output seen in 2008 until 2014. After borrowing growth in the form of excessive leverage, managing delevering in an orderly and socially tolerable fashion is a challenging task indeed. Inflation has consistently overshot expectations, remaining above target while output growth is probably flat, at best. That said, not all aspects of the post 2008 economic performance have been uniformly disappointing. The labour market has proven much more flexible than most dared hope, with weak real earnings growth more of an issue than unemployment. Indeed, the unemployment rate has held at a much lower level than it has done in previous recessions. This is reason for cheer.
Past performance is not a guarantee or a reliable indicator of future results. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Sovereign securities are generally backed by the issuing government, obligations of U.S. Government agencies and authorities are supported by varying degrees but are generally not backed by the full faith of the U.S. Government; portfolios that invest in such securities are not guaranteed and will fluctuate in value. Inflation-linked bonds (ILBs) issued by a government are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio.
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