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Quitting Your Job Means Wage Growth, Says Economist Leaving BOE

Policy maker Kristin Forbes says workers choosing to leave their jobs are a sign of confidence and higher pay
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Telling the boss to shove it may be a fantasy for many workers, but for outgoing Bank of England policy maker Kristin Forbes, it’s a sign that all is right in the labor market.

Forbes, who is herself leaving the central bank to return to her teaching role at the Massachusetts Institute of Technology, says the number of workers quitting is one of the indicators she watches closely to monitor confidence and the outlook for wages.

For many, she argues, changing role can mean an increase in salary. That's why a sliding quit rate now could be setting off alarm bells at the BOE, which is facing a slump in real wages and the prospect of weakening consumer confidence as the U.K. starts its long process of leaving the European Union.

“Often when you quit and move jobs, that's when you get a wage increase, and quits have fallen recently,” Forbes said in an interview last week. “That makes me think people might be a bit more cautious moving jobs and that might be acting to hold down wages.”

Despite record low unemployment, salaries in the U.K. are already lagging behind price growth. With inflation that’s nearly 1 percentage point above target and forecast to climb further, in part driven by a weakness in the pound, real wages slipped 0.6 percent in the three months through April, the largest drop since August 2014.

That’s a big problem in an economy propped up by consumer spending. BOE Governor Mark Carney warned earlier this year that households face “challenging times” in the second half and retail sales are already sliding as shoppers become less keen to splash the cash.

Meanwhile, Forbes says she’ll be monitoring developments from her office at MIT. She's leaving the BOE when her term finishes at the end of this month, after unsuccessfully arguing for an interest-rate increase to counter accelerating inflation at her final three monetary policy meetings.

“Quits are a sign of confidence by workers,” she said. “That’s one thing I’ll be following. If I start to see that turn, I think I’ll be more confident that wage growth will pick up sooner.”

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