MNI 5 Things: UK Earnings Growth Expected to Pick-Up in Jan

--January UK Labour Market Data Due For Release Weds

     LONDON (MNI) - The latest UK jobs market health-check will be released

Weds, when we will learn if there were any signs of changes to key metrics. The

MNI median expectations, taken from a poll of analysts, looks for an unchanged

jobless rate of 4.4% but a pick-up in total earnings growth to 2.7% 3m y/y.

                    Jan             Jan             Jan                      Jan

             Employment    Unemployment      Avg Weekly      Avg Weekly Earnings

                 Change            Rate        Earnings               Ex-Bonuses

            3m/3m '000s            3m %        3m % Y/Y                 3m % Y/Y

--------------------------------------------------------------------------------

MNI

Median              +85            +4.4            +2.7                     +2.6

Prior               +88            +4.4            +2.5                     +2.5

     Ahead of the release, we outline five themes for particular attention.

-Nominal Wage Growth on the Up ...

     January's earnings data could mark the start of an upward trend towards the

3%-mark, implying crucial implications for UK policy and wider growth. As

highlighted in recent MNI analysis (see MNI ANALYSIS: UK Wage Growth Could

Breach 3%-Mark in Coming Month), forces at play should see wage growth trend

higher over the coming months - weaker year-ago pay awards slipping out of the

annual calculation and stronger awards this year integrated in. The Bank of

England Monetary Policy Committee described the coming month's earnings data as

'key' in its most recent communication; a pick up starting January would signal

domestically generated inflation was gaining traction and strengthen the case of

removing policy accommodation.

-The Restoration of Real Wage Growth Should Follow. 

     Real regular wage growth has stood in the red for 10 straight months but a

0.6% m/m rise in January would be enough (assuming no revisions to back data) to

take the 3m y/y back to the neutral level. This will likely be asking too much,

especially given the applied inflation rate was January's 3.0%, but the prospect

of restored real wage growth seems completely feasible over the next few months.

February's data, next month, will see the -0.5% m/m November single month change

drop out of calculations and a smaller applied inflation rate of 2.7%. A pickup

in real wages would, theoretically, help boost household's purchasing power and

overall growth.

-Chance of a Reversal in the Jobless Rate. 

     Should employment growth deliver another solid gain and the unemployment

change count fall in line with recent averages there is a chance the jobless

rate fell back to 4.3% in January. Of the 17 analysts polled by MNI, many,

despite forecasting the rate to hold firm at 4.4%, conceded a fall back to 4.3%

was also possible. The jobless rate unexpectedly rose by 0.1pp last month, the

first increase since July 2016, on the back of a 0.3pp rise in the participation

rate. The labour market picture remains solid, however, and should these extra

workers be absorbed quickly the jobless rate could again trend lower. Remember,

the BOE recently revised down its estimate of U* to 4.25%, so if the jobless

rate did tick down in January that would imply a labour market running with

virtually no slack.

-Employment Growth Pencilled in to Remain Solid. 

     Following a poll of analysts conducted by MNI, a median 85,000 more people

are expected to have found employment in the three months to January, broadly in

line with the 88,000 outturn in December. Job vacancies rose by 9% y/y in the

three months to January and should point to further gains to employment growth

in the near-to-medium term.

-But is the Unemployment Count Trending Northwards? 

     Looking at the overlapping 3m/3m comparisons, the unemployment level has

increased for three straight months, so January's data will give us a clue as to

whether this is a developing trend. The (recommended) non-overlapping

three-month average had the unemployment level up 46,000  in the three months to

December, the largest increase since early 2013, but this was the first rise

since the three months to August 2016.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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