The household survey measure of US non-farm jobs, adjusted to exclude temporary census employment, rose by 132,000 in September to a 14-month high – see first chart. This may be a better guide to employment trends in the early stages of an expansion than the alternative payrolls survey measure, since it captures jobs created by start-ups. The household measure has gained 617,000 over the last six months versus a 433,000 increase in payrolls jobs.

Within the payrolls report, private-sector jobs rose by 64,000 in September. Further gains are likely, judging from a continuing recovery in job openings (vacancies), which lead employment – second chart.

Euroland monetary trends are consistent with an ongoing, but slower, area-wide economic recovery. A big divergence, however, has opened up between core countries and the beleaguered periphery.

Narrow money M1, comprising currency in circulation and overnight deposits, is usually a better economic leading indicator than broader measures. The first chart shows six-month growth of M1 (i.e. overnight) deposits for Euroland as a whole and core / peripheral groupings. (There is no country breakdown of the currency component of M1. The country figures for deposits refer to holdings by Euroland residents at domestic banks.) Area-wide expansion has slowed but was still a solid 3.5% in August, or 7.1% annualised. This, however, conceals continued strong growth in the core – defined here as Belgium, France, Germany and the Netherlands – offset by contraction in peripheral countries – Greece, Ireland, Italy, Portugal and Spain.

M1 deposits warned of the recession, sliding in both the core and periphery from late 2007 ahead of a fall in Euroland GDP in the second quarter of 2008. A synchronised recovery, meanwhile, from late 2008 foreshadowed a rise in GDP beginning in the third quarter of 2009. Recent core / periphery divergence is unprecedented and dates from the escalation of the sovereign debt crisis in early 2010.

Part of the explanation is that money-holders in peripheral countries have transferred funds to foreign banks perceived to be safer, either because of less exposure to bubble excesses or implicit backing from governments with stronger fiscal positions. The economic implications, though, are still negative – deposit outflows have tightened monetary and credit conditions and money held abroad is less likely to be spent on domestic goods and services.

A country breakdown shows that weakness has been most acute in Greece and Ireland, with Italy relatively resilient – second chart. Spanish trends have deteriorated sharply, with deposits contracting at a similar pace to that preceding the recession.

The G7 monetary base – currency in circulation plus bank reserves – contracted further last week, as a large fall in the Eurozone offset a rise in Japan. The base is at its lowest level since December – see chart.

Markets have rallied on hopes of a large QE2 liquidity injection and may correct if this is not delivered soon and on the expected scale.

There is an outside chance that the MPC will surprise markets with a further slug of QE tomorrow:

• The "MPC-ometer" – a statistical model designed to predict the monthly decision based on incoming economic and financial data – has a slight easing bias, reflecting recent weakness in business and consumer surveys and low average earnings growth. The latest reading is consistent with a further £25 billion of asset purchases. (The model calibrates this to be equivalent to an 8 basis point cut in Bank rate.)

• Eight of the nine members of the Sunday Times Shadow MPC favour more QE (although two of these individuals, bizarrely, also voted for a half-point rate hike this month). The Shadow Commitee has often mirrored MPC thinking.

• Adam Posen's decision to come out for more QE last week just ahead of the start of the October deliberations suggests that he is confident of support from other MPC members and wanted to exert pressure on waverers.

The key reason for expecting the MPC to hold back is that short-term inflation prospects have deteriorated further – a combination of high VAT pass-through, rising food and gas costs and renewed upward pressure on petrol prices could push the headline CPI rate up towards 4% over coming months. This increases the risk that more QE would boost inflationary expectations, a consideration that may weigh with the majority.

Continuing the recent run of poor inflation news, the annual rates of increase of the BRC food and non-food shop price indices firmed in September – the first chart shows the relationship with the corresponding CPI components. Higher wholesale petrol costs and the October hike in fuel duty, meanwhile, suggest a rise in the average price of a litre of unleaded back towards £1.20 – second chart.

The Bank of Japan has fired the "QE2" starting gun with the announcement of a new asset purchase programme. The details, however, are unimpressive – further study will be required before buying starts and the current intention is to purchase ¥5 trillion over 12 months, or just $5 billion per month. It is unclear, moreover, whether the monetary base impact of the programme will be sterilised.

To put the initiative into perspective, the Eurozone monetary base is likely to have fallen by more than the full size of the Japanese programme last week as banks repaid 12-month borrowing from the ECB. (Figures are released tomorrow.)

Chinese monetary base figures are available only monthly with a lag but a recent rise in the one-week repo rate suggests that money market conditions have tightened.

A previous post, meanwhile, highlighted that the US monetary base had fallen to its lowest level since January.

Despite all the talk of QE2, therefore, there has been no expansion of the global supply of bank reserves. The ECB and Chinese monetary authorities probably oppose such an increase, while the Bank of Japan is a reluctant foot-dragger.

Hopes of a QE2 boost to financial markets rest full-square on the Federal Reserve and its European satellite, the Bank of England. The close ties between the two central banks were illustrated last week by MPC member Posen's decision to break cover and call for more QE just one week after the Fed had signalled an easing bias.

Fed action is unlikely before the next scheduled meeting on 2-3 November – a long time for impatient bulls to wait. Markets buoyed by QE2 optimism may require a positive MPC "surprise" this week to sustain their recent gains.