mpc.theyserveforyou.com

mpc: 5 16 Taking all the evidence together, there was still a sharp contrast between the rapid growth in the services sector, and the less robust performance of manufacturing. On balance it seemed likely that growth in 2000 Q1 would be little different from the central projection in the February Inflation Report.

Labour market

17 Whole-economy productivity growth, defined by comparing GDP with the Workforce Jobs measure of employment, had picked up to 1.8% in the year to 1999 Q4, and to 2.7% on an annualised basis between 1999 Q2 and Q4. Figures based on the Labour Force Survey (LFS) employment measure suggested slightly lower figures, at 1.6% and 2.1% respectively. This took annual productivity growth back towards trend, but it was too early to say whether it represented anything more than a normal cyclical response of productivity to a recovery in output growth. 18 The labour market remained tight, with employment growth on the LFS measure up 0.3% in the three months to January. Unemployment had risen on the LFS (but not the claimant-count) measure, reflecting ­ in an accounting sense ­ a fall in inactivity, with the LFS unemployment rate unchanged for the past seven months. Survey data were consistent with this picture, and the Recruitment and Employers' Confederation (REC) survey showed a significant strengthening in the demand for staff, in line with the reports of skills shortages from the Bank's regional Agents. It was suggested that the labour market measures in the Budget, when taken together with previously announced reforms, might have a small positive effect on future labour supply. 19 Whole-economy average earnings growth, as measured by the headline rate, had risen to 5.9% in the year to January. Much of the increase seemed to reflect bonus and other payments, in part related to the new millennium. A survey by the Bank's regional Agents suggested that further bonus payments were due to be made in subsequent months, particularly in March, and that this might further complicate the analysis of the data. 20 Some members of the Committee considered that the pricing response by firms to an increase in earnings would depend on whether these took the form of higher settlements or faster `wage drift', (including bonuses and other payments that might be linked to productivity or profits), with some evidence suggesting that `wage drift' had a smaller effect on prices. Others believed that the effects