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Week in Perspective: Wages and jobs growth both impress in latest data


Good news on wage growth and employment emerged this week, although another survey pointing to a depressed hous-ing market could dampen sentiment. Unemployment remained at 3.9% in the three months to the end of February, its lowest level since 1974, while wages continued to grow above the rate of inflation, with total pay including bonuses growing at an annual rate of 3.5% over the period. After accounting for inflation, wages were about 1.5 per cent higher than a year earlier.

The earnings and employment survey, conducted by the Office for National Statistics (ONS) showed that 179,000 more people joined the workforce in the quarter, 80% of which were women. The survey also highlighted that there were ongo-ing skills shortages in some sectors, a fact that may have helped attract more women and students into the workforce. Last month, for example, it was reported that Budget hotel company Travelodge had launched new shift patterns in a bid to appeal to working mothers so that it could plug Brexit-related staff shortages. 

Inflation data released on Wednesday showed consumer prices rising in March at an annualised rate of 1.9% - the same as in February, and below expectations for a 2% increase. The main drivers were motor fuel prices rising between Febru-ary and March, although this was partially offset by falls in food prices and the cost of computer games rising more slowly; inflation in the games, toys and hobby sector fell to 1.1% in March from 3.1% in February.

Stable inflation at such low levels combined with wage growth of 3.5% should help boost the purchasing power of UK consumers. However, many economists expect that the factors that have kept inflation below 2% for the past three months are temporary and that the cost of living will rise later in the year.

Referring to the impact of computer games sales, Samuel Tombs of Pantheon Economics said: “Inflation in this sector is volatile and dependent on the timing of new computer game launches. Month-to-month changes largely reflect what ap-pears in the bestseller charts.” He added that inflation figures were likely to jump in April because of the timing of Easter compared with 2018. A rise in the energy price cap set by the regulator Ofgem, and higher oil prices could also push inflation up.

The ONS also released data on the UK housing market. It showed prices rose in the year to February at the slowest rate in six years. Prices actually fell by 3.8% in London. Nationally, prices rose by an average of 0.6% during the period. The news continues the downbeat run of data from the property market, which has struggled since the EU referendum. The fall in London house prices was the steepest since the financial crisis in 2009, although the capital is still the most ex-pensive location to buy a property with an average price of £460,000, compared to a national average property price of £226,000. The consensus among economists is that any recovery in the housing market is likely to be delayed until after any uncertainties surrounding Brexit are clarified.

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Important Notes:

Main source of information: Company Report and Accounts, Bloomberg.

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The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd. The information contained here is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

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