Tight labour, slack labour
- Data from the US indicates tightness in the labour market, with problems finding people to fill positions. This means payrolls cease to be a good indicator of labour market strength. The challenge of the US is that a sizeable minority are not in a tight labour market, having been left behind by the recovery.
- Tighter labour conditions for the majority pushes up wage growth – on a like for like basis wages are rising over 3%. Not coincidentally, service sector inflation is over 3%. This creates (local) inflation pressures which should provoke a Fed response.
- Nowotny of the ECB is speaking today. The coalition for easing, built by Draghi ahead of March, seems now to have fragmented and it seems unlikely that further policy accommodation will be forthcoming (beyond tapering the quantitative policy).
- UK industrial production is on the data calendar. This is not normally of much note, but with concerns about the uncertainties surrounding the UK referendum on EU membership, this may be looked to in order to gauge how much negative sentiment is impacting the real economy.