Looser labour market could pave the way for faster rate cuts

Our sentiment data, developed with Penta, suggests that labour market conditions have loosened and pay growth has slowed abruptly through the summer. If this trend is reflected in official data, it could motivate some Monetary Policy Committee members to join Swati Dhingra in voting for rate cuts at successive meetings.

What you will learn:

• Most of the individual sentiment indicators for labour market-related topics used in our nowcasts have fallen sharply in recent months. The one exception is talent and HR, suggesting firms continue to place a high value on retaining staff.
• Though official data shows much lower unemployment and higher employment in recent months, we think this is misleading, and is symptomatic of the data volatility problems that the Office for National Statistics continues to battle.
• In our view, the picture painted by our nowcasting model is a more accurate depiction of current labour market conditions.