UK Labour market data woes show the importance of nowcasts

We think that valid concerns about the quality of data from the UK’s Labour Force Survey (LFS) make it virtually unusable at present. Considering it will likely take another two years to fix the problems, this poses a major headache for policymakers and economists alike. Our proprietary sentiment data, developed with Penta, fills part of the information void, acting as a check on official data as well as being timelier.

What you will learn:

• Response rates to the LFS remain very low, resulting in significant data volatility. The challenges have been compounded by the Office for National Statistics also having problems measuring the size and structure of the population.
• As a result, LFS estimates of employment are probably too low, while it’s looking increasingly likely that the UK’s inactivity problem is less serious than previously feared.
• Our sentiment data-based nowcasts suggest employment growth is slowing to zero, and private sector regular pay growth stabilising at around 4.5% at the turn of the year. These results highlight the trade-off recently identified by the Bank of England’s Monetary Policy Committee between persisting inflation and weak growth and employment prospects.

Source: Oxford Economics/Penta/Haver Analytics