Is the BoE Too Optimistic on Wage Growth

Britons face a “rockier” labor market in the coming years that’s going to limit an improvement in wage growth, according to EY Item Club.

The forecasts published Monday are in contrast to the medium-term outlook presented by Mark Carney last week. While the Bank of England governor warned of a “challenging” 2017 for workers as inflation outpaces pay gains, the BOE sees a pickup from later this year, with wages growing close to 4 percent in 2019. In contrast, EY sees “negligible” real wage gains with nominal improvements of less than 3 percent right through 2020.

EY blames its gloomier outlook on a slowing economy and lower demand for workers. That will cause the first annual drop in the number of people being hired since the financial crisis, stagnating real pay growth and greater joblessness, the economic forecasting group said on Monday.

Bloomberg

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.