BoE Agents’ Report suggests unemployment due to rise
Today’s summary of the reports from the Bank of England’s agents says that private sector employment likely to be “broadly unchanged” for the next six months. We know that more public sector job losses are coming, so overall unem-ployment is very likely going to start rising again.
Each month, the Bank of England publishes a summary of the reports on business conditions from their agents in the regions and nations of the UK (more on the agents here). There are dozens of business and economic surveys these days, but this is one of just two or three that cannot be ignored because they tend to be proved right. (Or, as the Bank puts it, they often “have a high correlation with subsequently published ONS data”.)
As is often the case, today’s Agents’ Summary is a bit of a mixed bag, but some of the measures I pay particular attention to look pretty dull. One is investment intentions (planned and possible spending over the next 12 months) which are important because investment is such a key influence on the economic cycle. Today’s report shows that the agents expect investment only to grow slowly, and it looks as though the improvement earlier in the year may have been cut off:
The summary characterises this as “further modest increases in capital spending over the coming year”, which sounds fair enough. Its yet another indication that we’re unlikely to see an investment-led recovery this year.
The other element I pay particular attention to is what the agents tell us about businesses and employment. The headline employment statistics have been looking good for six months, with employment rising and unemployment gradually coming down. But, as Duncan has pointed out, if the labour market was really tightening you’d expect to see real wages rising, when in fact they’ve been headed in the opposite direction. You’d also expect to see more employers having difficulty recruiting the right staff, but there’s no sign of that:
As the summary puts it, private sector employment looks likely to be “broadly unchanged over the next six months.” Given that the OBR expects public sector employment to fall 110,000 between the first quarter of 2012 and the first quarter of 2013 it would be brave to forecast anything other than a return to rising unemployment.
The Agents’ reports may err on the optimistic side. Today’s Industrial Trends survey from the CBI reports that manufacturers’ total order books are down with firms “anticipating that production will be broadly unchanged over the coming three months (a balance of -3%)” – which would represent a slowing down from recent results. The Markit Purchasing Managers’ Index for manufacturing results at the start of the month also showed manufacturing growth slowing down; (but the Index was still positive, and it is worth noting that the Services PMI results showed “solid growth“.)