Is the BoE Too Optimistic on Wage Growth

Britons face a “rockier” labor market in the coming years that’s going to limit an improvement in wage growth, according to EY Item Club.

The forecasts published Monday are in contrast to the medium-term outlook presented by Mark Carney last week. While the Bank of England governor warned of a “challenging” 2017 for workers as inflation outpaces pay gains, the BOE sees a pickup from later this year, with wages growing close to 4 percent in 2019. In contrast, EY sees “negligible” real wage gains with nominal improvements of less than 3 percent right through 2020.

EY blames its gloomier outlook on a slowing economy and lower demand for workers. That will cause the first annual drop in the number of people being hired since the financial crisis, stagnating real pay growth and greater joblessness, the economic forecasting group said on Monday.


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