UK labour data may leave MPC divided – Lloyds Bank

The coming week’s UK releases centre on the labour market statistics and in view of analysts at Lloyds Bank, the labour market data will provide something for both the doves and hawks on the MPC, leaving its members divided on the near-term policy rate outlook.

Key Quotes

“We forecast a fall in the unemployment rate to 4.5%, which would be the lowest level since the 1970s and around the level the BoE believes is the ‘equilibrium’ level, below which wage growth accelerates. Yet there is scant sign of any pickup in wage growth, while latest figures show that productivity has barely risen since the financial crisis.”

“As expectations around a near-term UK rate hike continue to build, developments in the labour market will have a key bearing on the MPC’s thinking. Further evidence of a diminishing labour market slack are likely to be evident in the latest report. We expect employment to have increased by 100k in the three months to May. This should be sufficient to push the unemployment rate down to 4.5% from 4.6% - a new cyclical low and to around the BoE’s estimate of the equilibrium rate. Balance against this, however, headline wage growth is expected to remain week and drop below 2% for the first time since early 2015.”