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UK DATA: DMP realised employment growth waves warning flag; not enough to panic

UK DATA
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  • The DMP data shows that labour market is softening in quantity terms, wage growth has stabilised but expectations are still for slow positive employment growth ahead and wage growth that is above that consistent with a 2% inflation target. Things are more mixed when looking at price growth, a little bit of a blip this month on realised prices, but the trends still point lower.
  • The realised employment growth is the biggest red flag to us here. If expectations for employment growth start to tick lower that would likely lead to less negotiating power for workers and hence less wage growth going forward too. That could open the door for a faster pace of BOE cuts.
  • On their own, these data will not be signalling panic on the MPC - but they do warrant watching more next month, particularly in light of Bailey's comments this morning.

More details:

  • Realised employment growth in the single month of September was 0%Y/Y (the first time it has not been positive since August 2021) with the 3-month average falling to 0.5%Y/Y in the 3-months to September from 0.7%Y/Y in the 3-months to August (this was 2.0% as recently as March).
  • Expected employment growth remained steady at 1.1%Y/Y in the 3-months to September (it has been in a 1.0-1.3% range for 6-months now).
  • Realised wage growth has now been 5.7%Y/Y for each of the past 3 single-months readings - prior to that we had not seen a single month reading below 5.7%Y/Y since July 2022.
  • Expected wage growth (like expected employment growth) remains stable at 4.1%Y/Y - and has been 4.0% or 4.1% for the past 5 readings, down from 5.1% at the beginning of the year.
  • Mean realised growth growth at 4.5%Y/Y in the single month for September was the highest since May and the 3-month average picked up to 4.2%Y/Y in the 3-months to September, from 4.0% in the 3-months to August. However, this is still the second softest 3-month print since September 2021.
  • Mean expected price growth was again a little higher on the single month metric, but remained at 3.6%Y/Y in the 3-months to September, also the lowest since September 2021.
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  • The DMP data shows that labour market is softening in quantity terms, wage growth has stabilised but expectations are still for slow positive employment growth ahead and wage growth that is above that consistent with a 2% inflation target. Things are more mixed when looking at price growth, a little bit of a blip this month on realised prices, but the trends still point lower.
  • The realised employment growth is the biggest red flag to us here. If expectations for employment growth start to tick lower that would likely lead to less negotiating power for workers and hence less wage growth going forward too. That could open the door for a faster pace of BOE cuts.
  • On their own, these data will not be signalling panic on the MPC - but they do warrant watching more next month, particularly in light of Bailey's comments this morning.

More details:

  • Realised employment growth in the single month of September was 0%Y/Y (the first time it has not been positive since August 2021) with the 3-month average falling to 0.5%Y/Y in the 3-months to September from 0.7%Y/Y in the 3-months to August (this was 2.0% as recently as March).
  • Expected employment growth remained steady at 1.1%Y/Y in the 3-months to September (it has been in a 1.0-1.3% range for 6-months now).
  • Realised wage growth has now been 5.7%Y/Y for each of the past 3 single-months readings - prior to that we had not seen a single month reading below 5.7%Y/Y since July 2022.
  • Expected wage growth (like expected employment growth) remains stable at 4.1%Y/Y - and has been 4.0% or 4.1% for the past 5 readings, down from 5.1% at the beginning of the year.
  • Mean realised growth growth at 4.5%Y/Y in the single month for September was the highest since May and the 3-month average picked up to 4.2%Y/Y in the 3-months to September, from 4.0% in the 3-months to August. However, this is still the second softest 3-month print since September 2021.
  • Mean expected price growth was again a little higher on the single month metric, but remained at 3.6%Y/Y in the 3-months to September, also the lowest since September 2021.