ASI: still lots of slack in the labour market

Commenting on today's Labour Market release from the ONS, ASI Head of Macroeconomic Policy Ben Southwood said:

"Though the labour market looks strong, the Bank of England must not be complacent and it would be crazy to tighten policy now.

"Employment was up 193,000 on the quarter and 396,000 on the year, and the rate was up 0.3 percentage points; unemployment was down 125,000 on the quarter, 161,000 on the year, and the rate fell 0.4 percentage points to 7.2%.

"But the labour market is not yet what we'd call tight. Nominal wage growth is still running far too slow, suggesting the existence of substantial slack. Total earnings grew just 1.1% over the year to the last three months. By comparison earnings grew 4-5% for nearly every month of the 16-year great moderation.

"This, combined with well-below-target core inflation, suggests the Bank of England's policy is not too loose, and it would be premature to raise rates or roll back QE now."

For further comment email ben@adamsmith.org or phone 02072224995.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.