- Employment has continued to rise, despite the withdrawal of the furlough scheme and the Omicron hit...
- ...But growth will slow soon; few people who want a job don't have one, while employment taxes will rise in April.
- Wage growth has cooled, despite the tight job market; real wages look set to fall sharply this year.
Samuel Tombs (UK Economist)U.K.
The unemployment rate continued to fall in October, despite the end of the furlough scheme.
Some full-time workers have become part-timers post-furlough, but they don't seem to want more hours.
Wage growth, however, slowed to a below-inflation rate in October; the real wage squeeze will get worse.
Samuel Tombs and Gabriella DickensU.K.
- The MPC would ease monetary policy again in the unlikely event that another lockdown is imposed.
- Fiscal policy would be less supportive than in previous lockdowns; new curbs would dampen inflation.
- Negative rates are in the toolkit and are preferred to more QE; Bank Rate likely would be cut to -0.25%.
Samuel Tombs (UK Economist)U.K.
- October's rise in retail sales volumes was driven solely by people buying Christmas presents earlier than usual.
- Consumers' confidence recovered in November, but still is below-average, and will drift down over the winter.
- A large minority of people remain fearful of Covid; rising cases likely will instil greater caution over the winter.
Samuel Tombs (UK Economist)U.K.
- The 0.6% m/m rise in payroll employee numbers in October implies unemployment didn't rise post-furlough...
- ...But the drop in median pay in October suggests many furloughed staff have returned only part-time.
- Year-over-year growth in wages continued to slow in September; no sign of a wage-price spiral forming.
Samuel Tombs (UK Economist)U.K.
- Nearly 4% of all staff still were furloughed in September, yet redundancies appear to have remained low.
- Involuntarily part-time working, however, likely became much more widespread in Q4.
- October's labour market data will be partial and might not offset concerns about the recovery's strength.
Samuel Tombs (UK Economist)U.K.
- The MPC's view the output gap has closed means it must counter plans for higher government spending.
- But the Committee can wait until 2022 to act; the recovery is faltering, and underlying inflation is not high.
- The MPC will see key jobs data if it waits until December; higher rates are coming, but not just yet.
Samuel Tombs (UK Economist)U.K.
- Markets see a 50% chance of the MPC hiking Bank Rate next month; December viewed as a done deal.
- November still seems too early; the MPC saw "a high option value" in waiting for post-furlough jobs data.
- Inflation expectations exceed the rate implied by current inflation, but this residual isn't a reliable wage signal.
Samuel Tombs (UK Economist)U.K.
- The ONS estimates that underlying year-over-year growth in wages was between 3.6% and 5.1% in July...
- ...We expect an increase in labour market slack, post-furlough, to push this rate down to about 3.2%.
- Employers will pass on higher NICs rates to staff, while public sector pay will rise only modestly next year.
Samuel Tombs (UK Economist)U.K.
- Payroll employee numbers returned in August to their pre-Covid peak, but will dip in Q4, after furlough ends.
- We expect the unemployment rate to rise to 5.0% in Q4, from 4.5% in Q3; slack within firms will build too.
- Three-month-on-three-month annualised growth in wages fell to 3.2% in July; slack will keep it in check.
Samuel Tombs (UK Economist)U.K.
- Businesses are reporting low inventory in relation to demand, but shops remain well-stocked for now.
- Labour shortages should fade now that self-isolation rules have eased and the holiday season is nearly over.
- The workforce, however, is 2.2% below its pre-Covid trend; migration and participation won't fully recover.
Samuel Tombs (UK Economist)U.K.
- Employee numbers have rebounded since the spring, but total employment is lagging behind.
- Vacancies are high, but are concentrated in different sectors to those which will see post-furlough layoffs.
- High inflation and 4-to-5% unemployment didn't lift wage growth in 2017, and probably won't this time.
Samuel Tombs (UK Economist)U.K.
Next week's labour market report—released during our summer break—likely will show that employment is growing respectably, rather than spectacularly.
Samuel Tombs (UK Economist)U.K.
