The US economy continues to outperform forecasts, posting stronger-than-expected growth and falling unemployment even as interest rates remain high. For British policymakers, this resilience is a subject of intense study. The UK Treasury has launched an internal review into what can be learned from America's buoyant labour market and robust consumer spending, sources familiar with the matter have told the Guardian.
At the heart of the analysis is a stark contrast. While the UK economy has stagnated, with wage growth barely keeping pace with inflation and strike action disrupting key sectors, the US has added more than 13 million jobs since January 2021. Real wages have risen for the lowest paid, as several states hiked minimum wages and tight labour markets forced employers to compete for workers.
But the differences go deeper than headline numbers. The US has a more flexible labour market, with lower union density and fewer employment protections. That can be a double-edged sword. For households in Britain's industrial north, where factory closures and zero-hours contracts have bitten deep, the American model can feel like a race to the bottom. Yet the data suggests that in the US, even low-paid workers have seen their purchasing power improve.
"The US recovery has been powered by a combination of generous fiscal stimulus, strong corporate investment and a very tight labour market," said Sarah Colbourne, an economist at the Resolution Foundation. "But the UK has had higher energy prices, a bigger hit from Brexit and weaker productivity growth. We can't simply copy the US playbook."
The Treasury review is focusing on three areas: childcare costs, housing supply and skills training. The US has relatively low childcare costs for middle-income families, thanks in part to a system of subsidies and tax credits. In the UK, parents face some of the highest childcare fees in the developed world, forcing many mothers out of work. The government has pledged to expand free childcare, but rollout has been slow.
Housing is another factor. The US builds far more homes per capita than the UK, and has a more nimble planning system. In Britain, the shortage of affordable homes pushes up rents and makes it harder for workers to move to where the jobs are. The Treasury is examining measures to speed up planning approval and boost construction, though local opposition remains a major hurdle.
Skills and training also differ. The US has a less generous welfare system, which pushes people into work more quickly. But it also invests heavily in community colleges and vocational training, with employers playing a big role. The UK's apprenticeship system has been criticised as too rigid, with high dropout rates.
Labour unions in the UK have watched these developments warily. "We don't want a race to the bottom on wages and conditions," said a spokesperson for the Trades Union Congress. "The answer isn't to weaken protections but to invest in public services and collective bargaining. That's how you build a resilient economy."
The Chancellor is expected to make a statement on the review in the autumn, with a focus on how to boost business investment and raise long-term productivity. For now, the US continues to defy the pessimists. But for workers in Rotherham or Rochdale, the question is whether that success can be replicated without abandoning the social safety net.
