James Knightley, Senior Economist at ING, suggests that the UK has experienced a rapid deterioration in job creation, giving the sense that Brexit uncertainty is now becoming a drag on the economy.
“UK employment has fallen 6,000 in the three months to October. This is the first fall since June 2015 and is only the fifth fall since 2011. Surveys, such as the BoE’s Agents’ summary survey, had been showing businesses were becoming more cautious on hiring and investment in the wake of the Brexit referendum outcomes. Today’s report suggests that firms are now actually pulling back given the UK was creating over 170,000 jobs during the summer.”
“There was better news on the wage growth front, which excluding bonuses rose 2.6%YoY up from 2.4% and is the fastest rate of increase since August last year. However, if employment growth is slowing we have doubts that wage growth will pick-up significantly further. With consumer price inflation set to accelerate due to rising import and energy costs we expect to see a major squeeze on household spending power in 2017.”
“If job opportunities are also deteriorating we see further downside risk for confidence and activity in general. While the BoE are officially neutral on the outlook for monetary policy, we still think a rate cut is more likely than a hike next year.”
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