Today’s strong labour market numbers support the forecast here that the unemployment rate will fall beneath the MPC’s “threshold” by mid-2014. They also imply that productivity performance remains disappointingly weak.

The labour force survey (LFS) measure of the unemployment rate fell to 7.7% (7.69% before rounding) in the three months to July from 7.8% in the prior three months. LFS unemployment needs to decline by 20,000 per month for the rate to breach 7.0% by mid-2014. This looks eminently achievable: claimant-count unemployment leads the LFS measure and fell by 33,000 per month in the three months to August.

LFS employment has been growing solidly but, in addition, there has been a substitution of full- for part-time jobs. Aggregate hours worked, therefore, rose by 0.8% in the three months to July from the prior three months. With GDP currently estimated to have increased by 0.7% in the second quarter, the suggestion is that output per hour is continuing to slip – at odds with the MPC’s view that productivity performance would recover as the economy strengthened.