From not enough jobs to not enough workers

It’s remarkable how quickly the fear keeping policymakers awake at night has shifted from there being too many people out of work to there not being enough people to fill all the vacant jobs. Interestingly, the furlough scheme minimised the rise in unemployment during the worst of the pandemic and the closure of the scheme at the end of September may help to ease the current labour shortages.
Paul Dales Chief UK Economist
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UK Economics Update

Labour shortages to push up wages for a bit longer

The latest data suggest that the upward pressure on wage growth from labour shortages has a bit further to run. Admittedly, the discovery of the Omicron variant has clouded the near-term outlook for wages and the labour market, with higher virus infections and/or tighter restrictions once again a possibility. Nonetheless, our base case is that most of the upward pressure on wage growth will subside from mid-2022, underpinning our view that Bank Rate won’t need to rise as far as investors currently expect.

30 November 2021

UK Economics Update

Omicron – The risks to GDP and for the BoE

The restrictions announced by the government on Saturday in response to the new Omicron COVID-19 variant increase the downside risks to our GDP forecasts and the chances that the Bank of England delays increasing interest rates until next year. And although the worse-case scenario of another lockdown in January could reduce GDP by something in the region of 3.0% m/m, the one morsel of comfort is that the economy has become more resilient to lockdowns.

29 November 2021

UK Data Response

Money & Credit (Oct.)

The rise in consumer credit in October adds to evidence that economic activity fared well at the start of Q4. But that no longer offers much comfort in light of the discovery of the new Omicron variant. While much remains uncertain, the risks to our (already subdued) GDP forecast appear to the downside.

29 November 2021

More from Paul Dales

UK Economics Weekly

What we learnt, and didn’t learn, from the BoE

We learnt three things from this Thursday’s Bank of England policy decision and were left in the dark on two key issues. As a result, some of our forecasts for money market rates and gilt yields have changed.

6 August 2021

UK Economics Weekly

Hit to GDP from pingdemic not huge, but unhelpful

We estimate that the “pingdemic”, which has contributed to 1.1 million people self-isolating in the week ending 14th July, could reduce monthly GDP by 0.5-1.0% and is surely exacerbating the current shortage of workers. That’s not a huge hit to the economy and fewer people will be self-isolating after the rules change on 16th August. But it is clearly not helpful.

23 July 2021

UK Economics Weekly

New BoE and gilt yield forecasts

This week’s signs that two members of the Monetary Policy Committee have become more worried about the upside risks to inflation have led us to bring forward our forecast of when policy will be tightened from February 2024 to August 2023. That’s still some way off and is 12 months later than the financial markets expect. Because of that, we have also revised down our forecast for 10-year gilt yields.

16 July 2021
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