What do Agents’ company visit scores say about the weakness of wage growth?

Simon Caunt, David England and Imogen Shepherd.

AWE growth has picked up over the past year but stalled in recent months, remaining some way below pre-recession levels.  Should we expect that weakness to continue?  One way to gauge wage pressures is through the company visit scores (CVS) the Bank’s Agents assign for businesses they meet.  Agents score a range of variables, including turnover, employment and costs, -5 to +5, generally according to growth.  An anonymised CVS dataset is published on the Bank’s website.  Here we look at what CVS say about prospects for pay, considering factors such as recruitment difficulties, low inflation, public sector pay and the National Living Wage.  Overall, we think this evidence points to continued modest rates of wage growth over the coming year.

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Does business intelligence still point to labour market slack?

Alastair Cunningham & Glynn Jones

One of the puzzles arising from the economic recovery has been the difficulty of squaring sharp falls in unemployment with – at least until recently – only slow growth in average earnings.   The common interpretation is that there’s still more slack than “normal” in the labour market.  However, in this post, we argue that there has been a more marked labour market tightening so that there is now slightly less slack than “normal”.  That suggests that earnings growth has been suppressed by factors other than labour market slack – leaving a risk that wage inflation will pick up sharply if and when those factors wash out.

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