Due at 0830 GMT the September labour market report from Brexit land

Previews (bolding mine):


  • 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.


  • 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.

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%.


  • 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.