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KPMG comments on Q2 2018 labour market data

KPMG comments on Q2 2018 labour market data

Yael Selfin, Chief Economist at KPMG UK, comments on today’s labour market data


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“Today’s data confirms that the UK labour market continues to tighten, with the proportion of vacancies rising in 10 out of 18 sectors in Q2 against the previous quarter. This reflects the concerns we are hearing from our clients regarding skills shortages.


“Earnings, as measured by average regular pay, rose by 2.8% in June in nominal terms compared to last year, and by 0.5% in real terms, giving households a little bit more room to spend or ease their borrowing. Earnings growth remains relatively weak compared with its long term average, and we are unlikely to see any significant improvement until productivity performance recovers.


“Today’s figures showing an increase in labour productivity of 1.5% in Q2 is the largest quarter-on-year increase since late 2016. This is encouraging, but given the preliminary nature of the figures and the volatility of the data, it is too early to call what we’re seeing a new normal. Meanwhile, the expected gradual moderation in inflation, as the effects of the depreciation of the pound and higher oil prices dissipate, should raise real earnings growth, alleviating some of the pressure on households.


“Unemployment fell to 4% in Q2, further below what the MPC currently perceives as the equilibrium rate, and lower than the Bank of England’s latest forecasts. The MPC’s concerns with rising domestic inflationary pressures are likely to see it keep to its current course of gradual and moderate rate rises, as it aims to nip any inflationary pressures in the bud.”






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