, central banks can discourage people from spending and encourage them to save or pay off their debts, thereby tamping demand. That’s what the banks have done, yet here we still are.
What is undeniable, though, is that employment and wage growth remain healthy, while labour productivity is falling. With employers having to pay more to workers who produce less, labour costs are rising even faster than the wage bill. Employers are then passing those increased costs onto consumers by raising their prices. Ordinarily, that might drive away customers.
True, we are starting to see less turnover in job markets. There’s less job-switching by people hunting for better offers, and that’s easing the upward pressure on wages, with workers settling in for the economic storm they keep hearing is coming. Nevertheless, we’re seeing few signs of imminent layoffs, while the unemployment we have seen has tended to be concentrated in a small number of high-wage subsectors, like finance and tech.