Tight labour markets and low inflation persist
Labour-market and inflation data should continue to cast doubt on the Phillips Curve: tight labour markets have not resulted in higher inflation. Structural factors – like the effect of technology on the jobs market – are probably the culprit. The UK unemployment rate should be unchanged at 3.8% in November, a multi-decade low, while wage inflation should stay above 3% (although it should continue to trend down). In Mexico, the unemployment rate should also be little changed at 3.5% in December, in line with the average for 2019 and slightly up from the 3.3% seen in 2018. Likewise, the Australian unemployment rate should be unchanged at 5.2% with 11,000 jobs added in December. Going forward, the bushfires should have a negative effect on output and the labour market. Meanwhile, South African consumer-price inflation should rise from 3.6% to 4%, comfortably within the central bank’s target of 3%-6%. Similarly, the Bank of Canada’s preferred measure of core-inflation has strengthened in recent months and came in 2.2% in November – slightly above the central bank’s target – and should move sideways in December. Finally, Japanese core inflation should rise from 0.8% to 0.9% in December, boosted in recent months by the consumption-tax increase (underlying inflationary pressures are well contained).