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mpc: 8 though the effects of the disruption to petrol supplies could more than offset this.

The labour market

22 Particular uncertainties surrounded the current conjuncture in the labour market. The continuing steady growth in employment, together with lower levels of claimant unemployment than had been seen since the 1970s, suggested that the market remained tight. Earnings growth on the other hand had fallen back sharply from its peak early in the year. It was unclear how long this benign conjunction of strong quantities and modest earnings growth could continue. 23 Employment growth had slowed a little in the three months to July, with the Labour Force Survey (LFS) measure up 0.3% compared with 0.4% in the three months to April. Average hours worked had increased by 0.1% over the same period. But LFS unemployment was down sharply, and by more than the increase in employment, lowering the unemployment rate by 0.3 percentage points to 5.3%. Inactivity had increased somewhat in each of the last two LFS data releases. Reports from the Bank's regional Agents did not suggest that there had been any further tightening in the market, though shortages persisted and the recent fall in unemployment had drawn particularly on the pool of short-term unemployed. It was noted that the Workforce Jobs measure of employment suggested rather slower employment growth over the first half of the year than the LFS measure along with more rapid growth in inactivity. 24 While quantities remained tight, the rate of growth of pay continued to be slower than expected. The Average Earnings Index (AEI) again showed a fall in the annual growth of earnings on the three-month headline basis, from 4.1% to 3.9%, while annual growth was unchanged on the month at 3.8% in July. Earnings growth in each of the last three months had included a substantial negative contribution from bonuses. These AEI data contrasted to some extent with those on rates of pay for agency staff, with Recruitment and Employment Confederation data for September showing further sharp increases in permanent salaries and rates for temporary staff, though they were now consistent with the rate of pay growth as measured by the Reward index. The Bank's regional Agents reported little evidence of increasing pay pressures and suggested that signs earlier in the year of imminent difficulties in pay negotiations had not materialised. So the dichotomy between strong quantities and weak