- Paid employment in October rose further above pre-pandemic levels, giving an early sign that the furlough scheme closed without much impact. The Labour Force Survey (LFS) measure of joblessness fell significantly in the latest data.
- This evidence will embolden those on the Monetary Policy Committee (MPC) favouring a rate rise in December. But the EY ITEM Club still thinks the balance of risks, and the data needed for a full assessment of furlough’s end, mean a majority will wait until early next year.
Martin Beck, senior economic advisor to the EY ITEM Club, says:
“Labour Force Survey data for the three months to September showed a significant fall in the unemployment rate to a 14-month low of 4.3% from 4.8% in the second quarter. The third quarter also delivered a rise in the employment rate, which, at 75.4%, was the highest since summer 2020. Additionally, job vacancies in August to October reached a new record peak of 1.2 million.
“However, with the furlough scheme ending on 30 September and, according to HMRC data, protecting 1.1m jobs at that point, all eyes will be on the reassuring signal delivered by PAYE data for October. Paid employment grew 160,000 that month, which reinforces the message from earlier ONS survey evidence that the job retention scheme closed with a limited impact on jobs figures. October’s increase was in line with the average monthly rise of 164,000 over the summer, despite payrolled employment surpassing its pre-COVID-19 level in September, which offered further good news.
“Meanwhile, the MPC had cited uncertainty around the impact of the end of the furlough scheme as a reason to wait before tightening policy. So, today’s data has made the odds of a rate rise in December more finely balanced – a likelihood reinforced by the ONS’ estimate that underlying regular pay growth in the third quarter was at least 3.4% year-on-year, slightly above the immediate pre-crisis pace. But given the cost of living challenges facing households and a full assessment of furlough’s end arguably needing several months’ worth of data, the EY ITEM Club still think the MPC will delay rate rise until February.”