Analysts at TD Securities note that the UK’s September labour market report showed strong wage growth (ex-bonus regular pay +3.2% 3m/y) but the unemployment rate confirmed our off-consensus call of an increase to 4.1%.
Key Quotes
“The key private sector regular pay measure rose again to 3.3% 3m/y, its highest since early 2015. Productivity figures were disappointing, however, pointing to a decline of 0.4% q/q in 2018Q3, and perhaps more worryingly, just 0.1% y/y.”
“Overall, this shouldn’t do much to sway the MPC, as the big picture is one of continued tightness in the labour market. But today’s data does suggest that wage gains are being driven by labour shortages rather than productivity growth, which will put pressure on firm costs and hence inflation going forward.”
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