16 Dec 2015
UK ILO unemployment rate (3M) to remain unchanged, wage growth to drop
FXStreet (Mumbai) - The UK ILO unemployment rate (3 months) scheduled for release today is expected to come in at 5.3 per cent, unchanged from the previous reading. UK has seen some decent employment figures in the recent past. Unemployment is seen at the lowest since before the financial crisis. Sectors such as construction have provided glimpses of tightening.
Wages have moved up. However it has not been enough to impact price stabilization. Wage growth is currently at levels about half of where it was before the crisis. Today’s readings will be pitted against strong gains in wages seen in the latter half of 2014. Ben Brettell, senior economist at broker Hargreaves Lansdown observed “there are signs that wage growth is flattening out”. Brettell feels that wage growth data due today will likely show pay growth has slowed from 3.0% to 2.5%.
The CPI data released yesterday by ONS showed inflation had stagnated in November, month on month. Oil alone cannot be blamed for dismal prices. The ONS has confirmed that impact of lower energy prices on inflation in November has been less compared to the previous months. The blame can now be shifted to poor wage growth. BoE Deputy Governor Minouche Shafik highlighted the need to raise wages and reiterated that the rate cut would happen only when wages rise. Only higher wages can lift consumer spending and help to stabilize price. Michael Sawicki, Senior Economist at Loyds Bank also feels rate hike will happen only when wage growth is deemed satisfactory. If wage growth continues to weaken, it might further postpose BoE’s decision to hike rates.
Wages have moved up. However it has not been enough to impact price stabilization. Wage growth is currently at levels about half of where it was before the crisis. Today’s readings will be pitted against strong gains in wages seen in the latter half of 2014. Ben Brettell, senior economist at broker Hargreaves Lansdown observed “there are signs that wage growth is flattening out”. Brettell feels that wage growth data due today will likely show pay growth has slowed from 3.0% to 2.5%.
The CPI data released yesterday by ONS showed inflation had stagnated in November, month on month. Oil alone cannot be blamed for dismal prices. The ONS has confirmed that impact of lower energy prices on inflation in November has been less compared to the previous months. The blame can now be shifted to poor wage growth. BoE Deputy Governor Minouche Shafik highlighted the need to raise wages and reiterated that the rate cut would happen only when wages rise. Only higher wages can lift consumer spending and help to stabilize price. Michael Sawicki, Senior Economist at Loyds Bank also feels rate hike will happen only when wage growth is deemed satisfactory. If wage growth continues to weaken, it might further postpose BoE’s decision to hike rates.