The banks weigh in on the upcoming UK labour market report due at 09:30 BST
Barclays: We expect August earnings to grow in line with recent stable trend, while job creation is likely to remain positive on low productivity but we do not expect it to be strong enough to push the unemployment rate lower.
HSBC: UK unemployment dropped to 4.3% in the three months to July, the lowest since 1975, and 0.2ppts below the BoE’s estimate of equilibrium unemployment. This continued strength in job creation fed into the BoE’s more hawkish stance and we don’t expect any signs of weakening in this release: we expect unemployment will remain at 4.3% but the risks are skewed to another fall. By contrast, regular pay growth should remain sluggish, potentially slipping back below 2%. The BoE has signalled it sees positive signs in private sector pay growth on a 3-month annualised basis, so this measure may be one to watch out for.
ING: The jobs market has been pretty resilient over the past few months, but the real gamechanger is wage growth. The Bank expects wage growth to pick-up rapidly over the coming months as job market slack continues to erode. But while there has been increased momentum in the pay numbers over the past few months, for now, we think it is more a case of temporary drags fading rather than a sign of a new upward trend. But even with a consistent increase in the level of regular pay over the next few months, wage growth is unlikely to go much above 2% until at least the second half of 2018. And with inflation set to hover around the 3% level for the next few months, that will maintain pressure on household budgets.
Morgan Stanley: We expect the August labour market picture to look similar to July, given growth continuing to run at a similar 0.3%Q level in 3Q-17 on our tracking estimate. The MPC see equilibrium unemployment at around 4.5%, and we expect the unemployment rate to remain clearly below that level in this month's release at 4.3%, implying no spare capacity in the labour market. Employment intentions indicators continue to point to jobs growth. We expect the unemployment rate to hold steady at 4.3% with the balance of risk skewed towards another fall. We expect employment to have risen 191K in the three months to August but the labour force not to have kept pace as migration, particularly EU migration, likely slows. After two weak months in June and July, although we expect month-on-month pay growth to rise, we expect headline weekly average earnings growth (ex-bonuses) to fall to 1.9% 3M/Y from 2.1%, with total pay remaining at 2.1% 3M/Y. We see the balance of risk to both forecasts as on the upside. We continue to expect pay growth to pick up gradually in coming months reflecting the tight labour market and higher inflation, but with momentum contained by firms' caution as Brexit approaches and by a rise in non-wage labour costs, including a scheduled 1pp rise in the minimum employer pension contribution in April 2018. We see this data release as key for the November MPC decision. We see the risk of a hike as likely increasing from 70% to 80%, if unemployment stays at current levels and employment growth does not slow, as we forecast. We think it would require the combination of marked labour market weakness and dovish comments from several MPC members for the probability of a November hike to fall below 50%.
Nomura: The unemployment rate reached a fresh cyclical low of 4.3% in last month’s release, where we expect it to remain in this month’s report. We would once again suggest focusing on the monthly change in private sector regular pay to avoid base effect issues associated with the headline (3mma % y-o-y) earnings data. Monthly growth has averaged just over 0.2% in the past six months, or around 2.6% annualised.
RBC: This time there appears much less chance that the unemployment rate will tick down again than there was in recent months. After falling from 4.6% to 4.3% in the last three months, we expect a stable outturn at 4.3% again for the August print but with another reasonably healthy gain in the level of employment. On the average earnings front, particularly for the ex-bonus measure, the base effect is a little more demanding this time, so we expect that growth rate to slip back to 2.0% 3m/y from 2.1% 3m/y. For the including bonus measure, an unchanged rate of 2.1% 3m/y is anticipated.
18 Oct 2017 - 09:05- EquitiesData- Source: Barclays/HSBC/ING/Morgan Stanley/Nomura/RBC
Subscribe Now to RANsquawk
Click here for a 1 week free trial
RANsquawk provides audio news and commentary for over 15,000professional traders and brokers worldwide. Services include:
- Real-time audio coverage from 0630 to 2200 London time plus Asia-Pac 2200 to 1000 London time
- Teams of analysts covering equities, fixed income, FX, energy, and metals markets
- Real-time scrolling news service with instant analysis
- Daily and weekly pre-market research and calendars
- Video updates covering near-term key risk events & primary trading themes
- One-to-one chat with our expert analysts