Employment Continues To Grow, But Underlying Uncertainty Remains

Today’s data published by the Office for National Statistics suggests that, ahead of the referendum, employment continued to grow, albeit with some signs of softening below the headline numbers. Prospects for the labour market are now more uncertain following the UK’s decision to leave the EU.

In the three months to May, employment rose on the previous quarter, and the pace of growth also increased compared to the three months to February.

Unemployment fell, while for those in work, pay growth remained relatively subdued over the three-month period.

Persistently low inflation has continued to support spending power at the tills. But, with inflation likely to pick up further ahead, it underlines the need for an increase in productivity so that wages can rise faster.

Employment growth picks up...

Today’s data shows a solid increase in the number of people in work:

  • Employment rose by 176,000 (Exhibit 1) in the three months to May 2016 on the previous quarter. This is the strongest pace of growth since the end of 2015.
  • The employment rate for those aged 16 to 64 grew by 0.3 percentage points on the previous quarter to 74.4%. This is the highest since comparable records began.
  • The employment rate of women in the three months to May (69.6%) is also at its highest level since records began.
  • The employment rate for men in the three months to May was unchanged on the previous quarter at 79.2%

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  • The increase in employment predominantly reflected growth in the number of self-employed (+119,000), with the number of employees also increasing (+49,000).
  • The number of people working full-time rose (+118,000) over the quarter, continuing the growth we have seen over the course of 2016. The number of people working part-time also increased (+59,000).

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… while unemployment levels fall...

  • This month’s data also show that unemployment levels fell (-54,000) in the three months to May:
  • In total, 1.65 million people are now out of work and looking for work (Exhibit 2).
  • The unemployment rate ticked lower to stand at 4.9%, the lowest since July-September 2005. Looking at the length of time people are out of work, the improvement was driven mostly by falls in near-term unemployment.
  • In the three months to May, the number of people unemployed for between six and 12 months) fell by 33,000.
  • At the same time, short-term unemployment (unemployed for up to six months) fell by 14,000 on the previous quarter.
  • The number of people long-term unemployed (unemployed for over 12 months) and generally considered to be further away from the labour market, fell to a lesser degree (-7,000).

...as youth unemployment edges down...

Turning to look at unemployment amongst young people, there was some improvement over the quarter:

  • In the three months to May, there were 617,000 16-24 year olds out of work and looking for work, down 13,000 from the previous three-month period, continuing the steady decline of the past year.
  • The youth unemployment rate is now 13.5%, down from 13.7% on the previous quarter and 15.7% a year ago.

...as vacancies fall back from record highs...

In contrast to the positive employment and unemployment figures, after reaching a record high at the start of the year, vacancies fell further in the three months to June compared with the previous three-month period:

  • The number of vacancies stood at 747,000 in the three months to June, down 1.3% over the quarter (Exhibit 3). The largest contribution to the fall came from the human health and social work sector where vacancies fell by 7,000.
  • Despite falling over the three-month period, total vacancies are still up 2.0% on the previous year

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...employment creeps up in almost all nations and regions…

Rising employment in almost all nations and regions delivered UK-wide employment growth (Exhibit 4 overleaf).

  • In the three months to May, London saw the largest rise in employment (+56,000) followed by the South West (+39,000), South East (+26,000), Scotland (+17,000), the West Midlands (+16,000) and Yorkshire and the Humber (+12,000).
  • Employment levels were broadly unchanged in the East Midlands (+8,000), the North East and the East (both +7,000) and Wales (+4,000). Employment in Northern Ireland was unchanged (0).
  • The only region where employment fell was the North West (-15,000).

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…while unemployment fell in just under half of places...

Similar to the picture on employment, widespread falls in unemployment across the nations and regions led to a UK -wide decline:

  • Scotland saw the largest fall in unemployment in the three months to May (-18,000), followed by Yorkshire and the Humber (-16,000) and London (-14,000).
  • There was little change in the number of unemployed in North East (-8,000), Wales (-6,000), Northern Ireland (- 5,000), South East (-4,000), the North West (-2,000) the East Midlands and the East of England ( both -1,000).
  • In contrast, the number of people out of work and looking for work increased slightly in the West Midlands (+13,000), and the South West both +8,000)

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...but pay growth is still muted

For people in work, today’s data reveals that pay growth remained subdued despite the introduction of the National Living Wage in April (Exhibit 5).

  • Annual growth in regular pay (excl. bonus) in the private sector, was 2.4% in the three months to May, unchanged from the three months to April. On a monthly basis growth fell to 2.3% from 2.7% in the previous month.
  • Total pay (incl. bonus) grew slightly. In the three months to May, annual growth in total pay in the private sector stood at 2.5%, compared to 2.1% in the three months to April. This increase was driven by a pick-up in bonus pay growth (up from 0.6% in the three months to April to 3.5% in the three months to May).
  • Persistently low inflation has continued to support spending power at the tills. But, with inflation likely to pick up due to upward pressure from the sharp fall in sterling post-referendum, there is an increased need for a rise in productivity so that wages can grow at a faster rate.

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