The Malaysian Reserve/19 October 2017
LONDON • UK unemployment held at a 42-year low in the three months through August and the number of people in work approached a record high, according the figures published yesterday.
The latest snapshot of the labour market from the Office for National Statistics may help to explain why the Bank of England (BoE) appears to be edging toward its first interestrate increase for a decade.
In evidence to lawmakers on Tuesday, BoE governor Mark Carney made clear that the erosion of slack in the economy is the primary concern as policymakers prepare for their Nov 2 meeting. He said a rate increase would probably be needed in the “coming months,” repeating the recent signal from the bank.
Wage growth was little changed at just over 2% — well behind the rate of inflation — but officials are signalling they are no longer prepared to wait for a pick-up before tightening policy.
Still, not everyone on the Monetary Policy Committee is on board with that idea. Dave Ramsden said on Tuesday that the lack of wage growth means he sees little sign of second-round effects from higher inflation, and that domestic price pressures remain subdued.
Responding to the labour-market data, Elizabeth Martins at HSBC Holdings plc said the BoE is “still on” for a November rate hike, though it may not be a unanimous vote.
The jobless rate stood at 4.3% in the latest period, staying below the 4.5% rate regarded by the BoE as the “equilibrium rate” which starts to fan inflationary pressures. The number of people looking for work fell 52,000 to 1.44 million.
Employment rose 94,000 to 32.1 million. At 75.1%, the employment rate is just below the record 75.3% recorded in May to July.
With the labour market tight and Brexit curbing immigration, boosting growth without generating inflation may require a significant improvement in productivity, something considered unlikely given the dismal performance of recent years and the effect Brexit is having on investment. — Bloomberg
News Source: The Malaysian Reserve