So what can we learn from the latest jobs data ...?

The latest data on jobs and unemployment were released this week. So what can we learn from the data? Unemployment fell to 1.425 million. The level is down by 120,000 compared to the same period last year. Unemployment fell by 45,000 in the first quarter of 2018 ...

This encourages further doubts about the suggested weakness of growth figures in the first quarter. The initial estimate of growth was just 1.2% in Q1. Our forecasts for the current year had to be reduced from 1.8% to 1.5% as a result. The Bank decided to keep rates on hold following the weakness of the data. The implication of the latest data is, growth estimates may have been too pessimistic, especially in construction.

"Growth estimates may have been too pessimistic, specially in construction ..."

The unemployment rate was 4.2%. That's the lowest level since 1975. The economy has created 397,000 jobs over the past twelve months. The number of vacancies in the economy was over 800,000 in April. At peak in 2008, prior to the recession, there were just 700,000 vacancies in the economy. Get the picture? There are no signals the economy is in trouble. Growth forecasts will be revised up. The Bank mantra will revert to the February MPC stance. 

"Rates set to rise, earlier and to a somewhat greater extent" ...

So what of inflation? The Bank of England assumes the worst is over. Inflation will fall through the year. Back on target within the forecast horizon. It was ever thus ... but is this correct?

Oil price Brent Crude tested $80 dollars per barrel this week. Sterling fell below $1.35 against the dollar. Imported oil inflation is on the rise again. Earnings increased to 3% in March. Construction wages were up by 6%. Minimum wage rates have been increased. The genie is out of the bottle as far as public sector pay is concerned. Public sector pay is up by 2.4% in March, up from just 1.2% a year ago. 

Real earnings will be positive in the month of April and May. The squeeze on incomes will be relaxed, stimulating household spending in the year ahead. Inflation forecasts are too optimistic. Inflation will remain around 2.4% by the end of the year.

Inflation Forecasts are too optimistic. The rate will stay around 2.4% by end of year.

So what can we learn from the latest jobs data? Well quite a lot actually ...

And what of the U.S.A. ...

U.S. ten year bond rates closed just under 3.1% this week. Mortgage rates, (thirty rate year fixed rate average) jumped to 4.6%. The return to 4.5% ten year bond yields will materialize within a two year time frame. The Fed Blue Dot forecast is for short rates to rise to over 3% by 2020. The Fed is worried about the implications of Trump economics. The  GOP fiscal stimulus will exacerbate inflation and the twin deficit dilemma. 

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