The hike in the UK's minimum wage to £4.50 per hour has just been announced. The announcement has coincided with the news that, while the jobless total has fallen once again in February, the claimant count (the number of workers claiming unemployment benefit) has risen. We know that the recovery of the economy from its soft landing has been sluggish so far, and it is unusual to have such slow growth for such a long period without unemployment rising. To raise the minimum wage under these circumstances is cavalier - though clearly less so than would have been an even larger hike.

Minimum wages are not always bad for employment - Alan Manning and other economists have shown convincingly that there are circumstances where imposing a minimum wage can indeed raise employment. But a large increase in the minimum wage at a time when the economic growth is slow - and when the tax implications of war finance threaten future growth - is risky.

UK inflation has hit 3%, the upper limit of the target range which the government provides to the Bank of England. This is likely to reduce the scope for the central bank to reduce interest rates further - something it might ordinarily have wished to do in light of the sustained sluggishness of the economy.

The news about inflation is unlikely to lead to a relaxation of the government's 2-3% target band for inflation, however. The increase in prices has been fuelled largely by increases in oil (and petrol) prices. That increase is likely to be reversed as winter turns to spring. The hike in oil prices is largely attributed to the hard winter suffered in many parts of North America, and the consequent increase in demand for oil. Once the weather gets warmer, demand will fall back.

On the supply side, many producers have been operating close to capacity, and there is little evidence to suggest that the oil price hike has been generated by supply restrictions. Of course, that could all change in response to events in Iraq. But to the extent that any conflict will be short, there is unlikely to be a severe supply shock, and so oil prices should fall back by the middle of the year. Consequently inflation should fall back to a central position within the target band.

The Euro has been scaling new heights of late, against both the dollar and sterling. At first blush, this might seem odd. Growth in the eurozone is still more sluggish than in the USA or UK, and this is forecast to remain the case over the next 18 months.

But in other respects, the strong showing of the euro makes a lot of sense. The US and UK are both running current account deficits on their balance of payments - unlike the eurozone which is in surplus. So demand for euros is relatively high, since the net exports of the eurozone need to be paid for. For exactly the same reason, the demands for dollars and for sterling are relatively weak. The trade surplus of the eurozone is, in large measure, a consequence of its sluggish growth - people in those countries just aren't consuming enough to be importing as much as they're exporting.

Moreover, the threat of US and UK involvement in war - and the financial implications of that - means that higher taxes or squeezed government spending are on the cards for the medium term in these countries. Medium term, it is inevitable that the economies of the US and UK will take a hit if what seems likely to happen in the Gulf comes to pass. At the same time, the US seems to be edging away from a policy preference for a strong dollar.

Germany, in particular, is vulnerable to the current strength of the euro - its exports are beginning to look expensive, and so demand for its output is likely to fall. But the strength of the euro may yet turn out to be a blip exacerbated by the current international political situation. If the threat of war passes, or if war is short, the markets may well revert to a cautious optimism about the prospects for the American and British economies, the dollar and pound may well recover by the summer, and the overvaluation of the euro may quickly be corrected.

Council tax has hit the headlines. There are two reasons why. First, council tax bills are set to rise considerably this year. Secondly, the rise looks like being unevenly distributed across the regions, with the heaviest increases being in the southern part of England.

The two issues arise from different, but equally interesting, sources. Locally raised taxes contribute to the coffers of the local authorities only about a quarter of the budget. The rest is grant from central government. This means that for every £100 worth of revenue and expenditure in a local authority, only £25 is raised from local taxes. If the authority wants to raise its expenditure by a small amount - say 5% - then that £25 must rise to £30. That's a hike of 20% in council tax bills. In other words, even small differences between local councils in their preferences about expenditure can have a massive impact on the coucil tax bill received by residents. There is a cure to this problem - and that is to make a higher proportion of local authorities' revenues locally controlled. The proportion of local authorities' revenue that is accounted for by central government grant needs to be eroded over time. This is an essential prerequisite for enhanced local democracy.

The second issue is all about why councils in the south are complaining. It is certainly true that the largest increases in council tax are concentrated in the southern part of the country. The reason for this is that there have been recent changes in the way the governement compensates councils for differences in their ability to generate local tax revenues, given the rate of council tax. In areas where house prices are typically high, a given structure of council tax rates generates more revenue than in other areas - simply because a higher proportion of houses are valued in the higher tax bands. The new funding mechanism used to determine the central government grant to local authorities includes a system that corrects for this bias. That means that areas where house prices are high are now being treated less favourably than in the past. But it's important to recognise that the change in funding mechanism has been introduced purely to get rid of the bias in the system that has worked in favour of these regions up to now. It would certainly be consistent with the facts to argue that - far from being disadvantaged now - the southern counties have benefitted from substantial, albeit accidental, central government munificence in the past.

The pensions crisis in the UK is likely to have major impacts on the way we work. Essentially, we are faced by a double whammy. People are living longer and so pensions funds need to be buoyant in order to support the increased number of retirees. But the current poor performance of equities markets has deprived pension funds of this buoyancy.

The markets are likely to recover, so things may not really be quite as gloomy as they appear at the moment. But the fact remains that pension funds made investments at a time when optimism about the long term strength of the markets was excessive. There will be a shortfall, and that will require many people to work for longer than they had planned.

Retirement typically occurs at a convenient point in the life cycle - the children have left home, demands on the family budget have gone down. Just before retirement, for many people, the demands on the family budget are high. As expected expenditures of households fall, so retirement brings about a means whereby income can come into line with these expenditures.

But if pensions prove to be inadequate, or if their payment is delayed, many more people than now might want to enjoy several years of semi-retirement - withdrawal from pressurised full-time jobs into a more casual form of employment. This might mean consultancies, it might mean part-time work, or it might mean starting altogether new careers. It could result in a substantial change in employment structures in many industries (especially in the service sector), with employers choosing to contract work to self-employed older workers in preference to in-house staff.

With pay scales often depending on experience, older workers have often found it difficult to gain employment. With a freer market, older workers able to set their remuneration competitively might become cheaper to employ. Age discrimination might become less common. And the increased supply of labour to the market is likely to dampen wage growth for all types of worker. A longer working life and lower pay does not make for cheerful reading. Perhaps on this issue economics really is the dismal science.

But, on the bright side, the markets do seem to have passed their nadir. And the other source of the problem is our increased longevity. What's that they say about every cloud?