1. Employment is a lagging indicator – strength in late 2018 may reflect a pick-up in quarterly GDP expansion to 0.6% in the third quarter. Growth fell back to 0.2% last quarter.
2. Business surveys are signalling slower hiring – see first chart, which shows an average of employment expectations across the CBI / EU Commission monthly services, industry and retailing surveys.
3. As well as building inventories of physical goods, firms may be “stockpiling” labour to protect against an early end to freedom of movement in the event of a no deal Brexit. This could partly explain continued dismal productivity performance.
4. Solid increases in employment and average earnings have pushed annual growth of aggregate wages up to 5.1%, well above nominal GDP expansion of 3.0% – second chart. The excess implies a further squeeze on profits, with negative feedback to future investment and hiring.
5. Weak corporate real narrow money growth corroborates a squeeze on finances and is a negative signal for future employment – third chart.