UK employment got saved by inflation

During my morning FTea (Financial Times + tea), I read an article by Chris Giles that contained some interesting graphs on the UK economy. However, I believe they might have been misinterpreted.

The first graph was on living standards. Due to rising inflation combined with weak nominal wage growth, real wages declined:

Another interesting thing is that the figures for employment are remarkably good, despite Brexit:

Giles was puzzled by these 2 graphs:

“With labour market quantities so strong, the puzzle is why employees are not able to translate high demand for their skills into increased wages and growth in living standards.”

However, in my view this does make sense. The decrease in real wages is assumed to increase the demand for employment, as hiring new people becomes cheaper for firms.

So it might be the other way around: lower real wages in the UK might have saved the labor market from the gravitational pull of the Brexit black hole.

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