Through the impact on disposable household income, the labour market tensions should also provide some resilience to consum- er spending when the economy is turning down. Will this support last? Probably not. Historically, if we focus on the in- dustry sector, employment expectations -which represent companies’ hiring plans for the next three months- have started to weaken when the order book assessment was deteriorating (chart 3). This is also what we observe since the spring of this year, although there are nota- ble sector differences within industry (chart 4). Between January and October of this year, the consumer durables and intermediate goods sectors have seen the largest decline of the order book assessment and employment expectations. The investment goods sector has seen a more limited decline, in particular in terms of order books. Finally, consumer non-durables and food and beverages have seen the smallest decline of employment expectations. The latter has even witnessed a small improvement of order book levels. Employment expectations are a leading indicator of labour market bottlenecks so, given the declining trend in recent months of the former, labour should become less of a constraint on production (chart 5). Eventually this should slow down employment growth or even cause a decline in employment levels (chart 6), which in turn should weigh on household confidence and spending.
- BNP Paribas
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