James Smith, Economist, Developed Markets at ING expresses his take on the recently published the UK labour market report for the month of January.
“A fall in wage growth outweighs a positive employment surprise. That is another reason for the Bank of England to remain on hold throughout this year and next.”
“Employment was more resilient towards the end of the year than had been expected, with “headline” jobs growth coming in at 37k in the three months to December. That said, this is still much slower than the pace of growth earlier in 2016. Surveys, including the services PMI and BoE Agents survey, have been pointing to a slowdown in employment over coming months.“
“The surprise fall in wage growth is more alarming. Excluding bonuses, growth fell from 2.7% to 2.6% YoY. Pay growth has held up fairly well in recent months, but we’d attribute much of this to past labour market strength and also the introduction of the new National Living Wage. Given the weaker hiring outlook, we have doubts that wage growth can pick-up much further – the latest BoE Agents survey found that pay growth is expected to fall back to 2.2% this year.”