Holding flat the labour share may be too strong an assumption if the UK continues its cyclical rebound. Nonetheless, even the rise in wage growth seen through this year appears to have subsided somewhat over recent months. Shorter-term measures suggest annualised rates of pay growth of around 1 to 1.5% in Q3, down from 2.5 to 3% in Q2. Wage growth appears to be fizzling. And, of course, those are not the only potential downside risks facing the UK. World events have added to those downside skews over the past few months. There is now rather more convincing evidence of a gentle slowing in the UK and world economies since the summer. In the UK, this gentle slowing has been apparent since the middle of 2014. It leaves growth, in the UK and globally, little more than trend. Growth could accelerate in the period ahead, with the cost of credit at historically very low levels. Since the crisis, however, the pattern of UK output has been shaped less by the cost of credit today than by uncertainty about demand tomorrow. It was that uncertainty which cratered world demand in 2008. It was that uncertainty which flattened UK growth during the euro-area crisis of 2011–12. And it was the relief rally after that euro-area uncertainty abated which caused UK growth to bounce back during 2013–14. Uncertainty about demand is, once more, on the rise.
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