26 Nov 2019
Irish Economy: Earnings growth remained robust in Q3
The latest data from the CSO show that average weekly earnings growth remained robust in Q319 at 3.4% y/y, broadly in line with the growth rate that has prevailed over the past 18 months.
All of the earnings growth in the past year has come through higher hourly earnings (+4.0% y/y to €768.14), with the second component, the number of paid hours, actually falling by 0.2 to 32.6 hours. All 13 economic sectors have shown positive growth year-on-year, although the growth rate varies considerably across sectors. The IT and Admin and Support Services sectors recorded the highest increases in earnings at 7%, while increases in the Education and Transport sectors were barely above 0%. Growth in the Construction sector was muted at 1.1%.
With unemployment now below 5% and employment growth reaccelerating in Q3 to 2.4% y/y, increasing wage pressures are to be expected. However the 3.4% annual growth rate in Q3 was actually slightly lower than the 3.6% annual growth seen in Q2, with this figure having been revised up from the initially-published 3.5%. Indeed, growth in average weekly earnings in Q3 was actually the lowest in five quarters, although this feels like splitting hairs given that annual growth has been either 3.5% or 3.6% in each of these periods, and the tendency for the initial figure to be subsequently revised. Nevertheless, the latest data suggest that wage pressures, while present, are not yet escalating. It is also worth noting that, with inflation still below 1%, the majority of wage growth is translating into higher purchasing power for consumers.
Manifestos at the ready
Arguably the main event over the past week was the publication of the two main party manifestos. Labour launched a blockbuster on Thursday. This included a pledge to raise day-to-day spending by £83bn per annum by 2023/24, which the party claims will be funded by the top 5% of income earners, the corporate sector and a financial transaction tax. In addition, Labour’s proposals include a commitment to an additional £55bn of investment, funded by higher borrowing. Furthermore, it intends to freeze the state pension age at 66 and to nationalise the large energy and water companies, the railway and Royal Mail. These policies are not formally costed. Over the weekend, Jeremy Corbyn promised to recompense women whose retirement ages were raised from 60 to 66 from the mid-1990s onwards (the so-called WASPI women). This would also count as additional expenditure.
By contrast Sunday’s Tory manifesto launch was a subdued affair, and very light on contentious policy surprises, taking few risks in alienating the electorate. Some commentators have labelled this a ‘health and safety’ policy agenda. Clearly the Conservatives have learnt the lesson in 2017 when the media rounded on several of their proposals, especially on social care. The Tories intend Brexit to remain at the heart of their campaign messaging. Indeed their manifesto promised to begin parliamentary Brexit votes before Christmas to enable the UK to leave the EU by the (latest) deadline of 31 January next year. It also included a promise not to increase income tax, national insurance or VAT, alongside a commitment to raise the number of nurses by 50k.
Boris looks to have it in the bag
Neither of the two TV leaders’ debates (last Tuesday and Friday) seemed to result in a clear winner. Interestingly, during the session with the four leaders on Friday, Jeremy Corbyn revealed that his position in any second EU referendum would be agnostic. This of course is if his party wins the election and holds a vote on a renegotiated deal.
The Conservatives’ strategy seems to be to attack Labour, and promote their Brexit policy. This seems to be working. On average polls now estimate their lead over Labour to be 14% (43% v 29%), up from 9-10% a week ago. Meanwhile the recent Lib Dem drift appears to have stabilised at 15%. We have of course warned over shifting party allegiances and the difficulties in translating voting shares into seats. However, on a lead of this scale it would be difficult to see anything other than Boris Johnson returning to 10 Downing Street with an overall majority.
Indeed a poll by Survation in Great Grimsby, a seat held by Labour since 1945, showed the Tories winning here with a 10% swing from Labour. This suggests strongly that the Conservatives are set to capture a number of Labour seats in areas that voted to leave the EU in 2016. This seems especially so in the Midlands, the North West and Wales. Bookmakers’ odds show Mr Johnson’s party 4/9 to win an overall majority on 12 December. Betting prices have not been a reliable guide to the outturn of recent political events. Even so it does seem as though this election is the Conservatives’ to lose.
US 13.30 Goods trade balance
US 13.30 Wholesale inventories
US 15.00 New home sales