Alternative data can fill the void left by the LFS

The Office for National Statistics’ (ONS) recent decision to suspend publication of data from the Labour Force Survey (LFS) has left a big hole in our understanding of the UK labour market. Our proprietary sentiment data suggests the labour market was more resilient than the unadjusted LFS data implied in the summer, though there has been a cooling in labour demand recently.

What you will learn:

• The temporary solution implemented by the ONS in October looks questionable. His Majesty’s Revenue and Customs (HMRC) real-time information data does not include self-employment and its early estimates have an upward bias. The flaws in the claimant count are well known. That the ONS opted for this solution is a mark of how little faith it currently has in the LFS.
• Alternative indicators such as our proprietary sentiment data, developed in collaboration with Penta, can help fill the void left by standard economic data. High frequency and timely availability mean alternative data can provide a useful early insight, and alternative data do not rely on survey respondents and are thus not affected by falling response rates.
• The latest sentiment data suggest wage growth is gradually moderating, but it is still much faster than what is consistent with achieving the inflation target. With the data also suggesting labour market conditions are only loosening gradually, near-term interest rate cuts look unlikely.