Strong Labour Report Ups Pressure on BOE

The April/May data signalled tighter labour market conditions, with both employment and wages recording substantial growth.

• The three-month unemployment rate edged down by 0.1pp to 3.8% against expectations of a 0.1pp uptick.
• The strong report saw a +23K uptick in payrolls, with April revised upwards substantially to +7K from an initial estimate of -136K.
• April employment increased a marked +250k, outpacing the consensus expectations by 100k.
• The inactivity rate again declined by a strong -0.4pp on the quarter (to 21.0%). This swift reduction in inactivity was last larger at -0.5pp in 2012.
• Wages rose +7.2% 3m/yoy (weekly earnings ex bonuses), a 0.3pp acceleration to a series high increase outside the pandemic years (the series began 2001).
• This was likely boosted by national living and minimum wage increases which were lifted by around 10% from April 1.
• This underscores the risk highlighted by the BOE's May MPR comment "pay growth could plateau at rates above those consistent with meeting the 2% inflation target sustainably in the medium term".
• The data will make uncomfortable reading for the MPC ahead of next-week's policy meetings and probably nails on a 25 bps hike - and offers some ammunition to the more hawkish members to at least discuss a return to 50 bps hikes.