MNI INSIGHT: BOE Wage Growth Optimism Rises As Job-Hopping Up

--UK Workers Changing Jobs At Fastest Rate Since Before Crisis

--Faster 

By David Robinson and Jamie Satchi

     LONDON (MNI) - Signs that British workers are job hopping at the highest

rate since before the financial crisis are reinforcing hopes among Bank of

England Monetary Policy Committee members that earnings growth will pick up in

2019.

     Rising wages, or at least unit labour costs, are central to the view among

many MPC members that the UK is heading for gradual rate hikes, assuming that a

hard Brexit does not derail its forecasts. Now data beginning to show increased

job churn seems to be linked to higher pay increases for workers staying in

their current roles as employers seek to retain staff, buoying confidence at the

Bank.

     The number of people switching jobs as a proportion of total employment

rose to 0.86% in the second quarter, the highest for just over a decade and

inching closer to the 2001-2007 average of 0.94%, according to Resolution

Foundation analysis based on the monthly labour force survey.

     Job churn among the 18-29 age group picked up to 1.66% in the first three

quarters of the year, but still lagged its pre-crisis average of 1.98%, while

older age groups were in line with pre-crisis norms, said Stephen Clarke, a

senior economist at the Resolution Foundation.

     --STICKERS AND TWISTERS

     While getting hard data to link turnover and pay is tricky, it seems this

pick-up in job-hopping is, as the BOE would hope, coinciding with higher

salaries.

     The Annual Survey of Hours and Earnings released Oct. 25, using data from

April 2018, showed median earnings for those not moving jobs rose by 5.2%. This

compared with a rise of only around 2% in the 2017 ASHE survey, cited by BOE

Chief Economist Andy Haldane in an October speech, when he lamented that

sluggish pay growth for "stickers" was a missing link in an overall rise in

wages fuelled by substantial boosts for "twisters" moving jobs.

     Twisters' average pay had jumped by over 7% in April 2017, but the gap with

the stickers has narrowed substantially, the BOE believes, in a bullish

development for the labour market.

     Haldane noted in an interview with the Economist published Nov. 15 that

both stickers and twisters now seemed to be able to get a decent pay rise.

     "Conversations with people, both on the employer and on the employee side,

convinced me that this was indeed a generalised tightening," Haldane said.

     --FEBRUARY MEETING

     The Bank of England is assuming that growth in average weekly earnings will

rise to 3.25% in 2019 from 2.75% in 2018, according to its November Inflation

Report.

     The next key meeting for the Monetary Policy Committee is February when

Bank economists will trawl through the data and complete their annual stock take

of the labour market.

     The MPC could well stick to its assumption of accelerating earnings growth

and, away from the turmoil surrounding Brexit, look forward to a world in which,

as Deputy Governor Ben Broadbent said in a CNBC interview, markets' previous

expectations for one 25-basis-point hike a year may be too low.

     Given the Brexit circus, however, the market is no longer even fully

pricing in a 2019 hike, with MNI PINCH estimates indicating an 82.5% probability

of a rate hike by December 2020.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$B$$$,M$E$$$,MT$$$$,MX$$$$,M$$BE$]