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mpc: 5 imply a higher effective tax rate than in the past. The changes to fuel duties would temporarily reduce inflation, other things being equal, in the short term. The various measures on which the Government was consulting were, by convention, not taken into account in the projections because they were not yet definite. It was noted that if implemented they too would temporarily reduce measured inflation slightly, although there would be some partly offsetting demand effects to take into account.

Labour market conditions

16 Employment had risen by around 80,000 in the three months to August compared with the previous three months; part-time work rose slightly more than this, and full-time employment fell slightly. Average hours worked had also risen. Unemployment had fallen by around 100,000, largely accounted for by a fall in the short-term unemployed. Vacancies had risen, and the British Chambers of Commerce, Recruitment and Employment Confederation and CBI surveys were all suggesting increasing recruitment difficulties and skill shortages, as were contacts of the Bank's regional Agents. 17 The continued tightening in the labour market had not, though, been reflected in headline (three- month moving average) earnings growth, which had remained at 3.9%, much lower than earlier in the year and below the Committee's August projection. The key components had, however, been volatile. The twelve-month rate of private sector earnings growth had risen from 3.9% in July to 4.3% in August. Private sector services earnings growth had increased by one percentage point to 4.7%, in part reflecting a smaller negative contribution from bonuses than in recent months. The whole economy measure of growth in regular pay (ie excluding bonuses, and not seasonally adjusted) had eased slightly from around 4.4% in Q2 to a revised 4.2% in July and 4.3% in August; manufacturing had fallen by 0.8 percentage points to 3.6% but private services had risen by 0.7 percentage points to 4.9%. The twelve-month average of settlements had remained at 3.0% in September. 18 Given their month-to-month volatility, there was not much evidence in these data of accumulating labour cost pressures. Staff analysis of the 2000 New Earnings Survey suggested that earnings growth in the year to April 2000 was broadly in line with the Average Earnings Index figure for the same period. While the Bank's regional Agents were reporting increased concerns amongst their contacts about the coming pay round, some members pointed to the recent Pay Prospects survey produced by Industrial Relations Services, which suggested that the median settlement in the next pay round was