Employment Growth Remains Strong, But Wage Growth Slows

Much of today’s data covers the pre-referendum period – though it does include data for July – so it is still too early to make any assumptions about the effect of EU referendum vote on the labour market. The labour market also tends to lag the real economy by several months.

In the three months to July, employment rose on the previous quarter, and the employment rate was 74.5% - the joint highest since comparable records began in 1971.

Unemployment fell over the quarter bringing the unemployment rate to 4.9% - its lowest level since mid- 2005. But, after falling between June and July, the claimant count increased in August.

Wage growth slowed over the three months to July with real pay growth falling to 1.9%. The introduction of the National Living Wage does not appear to be having a discernible effect on pay growth at the aggregate level.

Employment levels continue to increase...

Today’s data shows that employment growth has remained strong:

  • Employment rose by 174,000 (Exhibit 1) in the three months to July 2016 on the previous quarter, in line with the pace of employment growth in recent quarters. There are now 31.8 million people in employment in the UK.
  • The employment rate for those aged 16 to 64 grew by 0.3 percentage points on the previous quarter to 74.5%. This is the joint highest since comparable records began in 1971.
  • The rise in employment was driven by an increase in the number of employees (+128,000), while the number of self-employed also increased (+59,000)


Alongside this, more people are now working full-time (+157,000) with part-time employment also increasing over the quarter (+17,000)

...as jobs grow in a range of sectors…

A separate dataset released today looks at the number of jobs in different sectors of the economy. The statistics reveal that jobs growth was fairly broad-based:

  • In the three months to June, the information and communication sector (+39,000) and wholesale and retail trade (+28,000) were key areas of growth in the economy (Exhibit 2 overleaf).
  • Firms in real estate and accommodation and food service activities also made a contribution to jobs growth (both +26,000).


  • In contrast, the number of jobs in the agriculture, forestry and fishing sector and the public administration, defence and social security sector fell in the three months to June (-16,000 and –9,000 respectively).

...while the number of people looking for work falls..

Coupled with the positive data on employment, unemployment levels fell (-39,000) in the three months to July:


  • In total, 1.63 million people are now out of work and looking for work (Exhibit 3).
  • The unemployment rate was 4.9%, the lowest since JulySeptember 2005.

Looking at the length of time people are out of work, the improvement was driven mostly by falls in medium-term unemployment, i.e those who have been unemployed for 6 -12 months:

  • In the three months to July, the number of people unemployed for between six and 12 months fell by 32,000.
  • The number of people long-term unemployed (unemployed for over 12 months) and generally considered to be further away from the labour market, also fell (-13,000).
  • But, short-term unemployment (unemployed for up to six months) increased by 5,000 on the previous quarter.

...as youth unemployment remains unchanged...

Youth unemployment has not seen the same progress as the rest of the labour market remaining broadly unchanged over the quarter:


  • In the three months to July, there were 621,000 16-24 year olds out of work and looking for work, unchanged from the previous three-month period.
  • The youth unemployment rate is now 13.6%, unchanged on the previous quarter, 1.8 percentage points lower than a year ago and 8.9 percentage points lower than the recession peak.

...but the claimant count rose following a postreferendum fall in July…

The data published today also revealed that the number of people on the claimant count increased in August:

  • The claimant count rose by 2,400 to 771,600, between July and August
  • The claimant count had fallen between June and July, though last month’s figures were revised down from a fall of 8,600 to a smaller decline of 3,600.

...as vacancies increase…

After 3 months of falling, today’s data reveals a small increase in vacancies:

  • The number of vacancies stood at 752,000 in the three months to August, up 0.4% on the quarter and up 1.3% on the year.

...while employment rises across most UK nations and regions…

Strong employment in the nations and regions delivered UK-wide employment growth (Exhibit 4).

  • In the three months to July, Scotland saw the largest rise in employment (+51,000) which can be partially attributed to the seasonal impact of the oil and gas sector.


  • There were also increases in the East (+40,000), the East Midlands (+26,000), Wales (+18,000), North East (+11,000), South West (+10,000), North West (+8,000) and Yorkshire and the Humber (+6,000).
  • Employment was broadly unchanged in London (+1,000), Northern Ireland and the South East (-4,000).

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

  • The rise in employment across most regions and nations was accompanied by a fall in unemployment in half of the nations and regions.
  • In the three months to July, Scotland saw the most substantial fall in unemployment (-29,000), followed by the East (-16,000), South East (-15,000) and Wales (- 10,000).
  • Unemployment was broadly unchanged in the East Midlands (-4,000), Northern Ireland (-2,000) the North East (+3,000), the South West and Yorkshire & the Humber (both +1,000)
  • In contrast, unemployment increased in the West Midlands (+17,000), London (+9,000), the North West (+7,000).

...but wage growth continues to slow.

For those in work, wage growth continues to hover at a little over 2.0%. (Exhibit 5).

  • Annual growth in regular pay (excl. bonus) in the private sector, was 2.3% in the three months to July, down from 2.5% from to the three months to June and in line with its average since the beginning of the year.
  • Total pay (incl. bonus) also fell: in the three months to July, annual growth in total pay in the private sector stood at 2.4% from 2.6% in the three months to June.
  • Real pay growth fell to 1.9% on the year in the three months to July. Inflation is expected to pick up following the sharp depreciation in sterling and as past declines in energy prices fall out of the calculation. With businesses set to act cautiously on pay given the economic uncertainty, weak real pay growth is expected to weigh on consumer spending ahead.


The next labour market update will be published on 19 October.

A CBI/Pertemps update will follow soon.

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