UK jobs report a mixed bag for the BoE – ING

James Smith, Developed Markets Economist at ING, suggests that for the Bank of England, the fact that UK wage growth is now the highest since the end of 2008 –3.2% excluding bonuses – will be the key takeaway from today’s jobs report.

Key Quotes

“Momentum has really picked up over recent months, and reinforces the idea that firms are having to pay increasingly high premiums to retain and attract talent.”

“Admittedly, we suspect the current level of wage growth represents something of a peak but we expect the underlying trend to stay with us as we move into 2019. So in any other situation, we suspect the Bank of England would be looking to hike rates again fairly soon.”

“But as ever, Brexit is the number one consideration, and there is some tentative evidence on the employment side of the jobs report that this is starting to cause problems.”

“Given the mounting uncertainty surrounding Brexit – in particular, whether Parliament will ultimately approve any deal Theresa May agrees – there is a risk we won’t know for sure that ‘no deal’ has been avoided until the New Year.”

“We therefore think the recent trend in employment is likely to persist in the short-term, and we are likely to see the economy as a whole lose steam over the winter.”

“For that reason, we don’t expect a Bank of England rate hike until May 2019 at the earliest.”