1. I have been worried for some time that the UK labour market has been impaired following the disruption from Covid and the like. To me, there is a risk that U* has risen to more than 4.5% the BoE has estimated (their estimate is on p. 13 of the November MPR).
2. So the labour market data will be crucial on this. What does it say? Fkigure 4 of the release shows a blip up
"Annual average regular earnings growth for the private sector was 5.4% in August to October 2024 (Figure 4). This was up on the previous three-month period (4.9%) and last higher in March to May 2024, when it was 5.6%."
3. What are we to make of this blip up? I don't want to read too much into one month, but it's concerning. The ONS does say "This growth rate is affected by a small decrease in the October 2023 estimates, which has caused a slight base effect.". It turns out that wages fell in October 23, so there is an effect here, but this is one month in a 3month on 3 month measure.
4. Vacancies have continued to fall, and are now roughly at the 2019Q4 pre-pandemic level. Our previous work, however, showed this was inflationary.
