The Chief Economist of the BoE was right to highlight the “unique combination of challenges facing the UK economy” in a recent speech given on January 9th. According to Huw Pill, “while many countries are facing some of these challenges, the UK is unusual in facing all of them at once”.
As a result, Huw Pill suggested that the NAIRU had risen. But the UK unemployment rate edged down from 3.67% to 3.66% in November.
The risks for monetary policy are clear: the unemployment rate may fail to rise above the NAIRU this year, pushing wages up further. The y/y for average weekly earnings in the services sector hit 6.9%, not far off the peak of 7.4% y/y recorded in April 2021.
Average weekly hours worked (full-time) are falling in the UK too: this may be indicative of an even tighter labour market than the headline figures suggest, reflecting a shift towards alternative working arrangements prioritising work-life ‘balance’, for example.
The labour strife is ongoing. Members of the National Education Union (NEU) are the latest to have voted in favour of industrial action, in a dispute over pay.
Working days lost totalled 1.634 million in the six months to November, the most of any 6-month period since May 1990.
