Employment Growth Slows

Today's figures show the labour market is performing relatively robustly, but with further clear evidence, provided by slowing employment growth and a rising claimant count, that progress has slowed and there is a risk of slipping into reverse in months to come.

Employment rose over the quarter to September to 31.8 million and the employment rate was 74.5% - remaining at the joint highest rate since comparable records began in 1971. Positively, unemployment fell by 37,000 in the three months to September, while the unemployment rate fell to an 11 year-low of 4.8%.

But, more timely data on the claimant count, showed the number of people claiming out of work benefits increased to its highest level since November 2012.

Wage growth increased slightly over the three months to September with annual regular pay growth reaching 2.4%. However, real average earnings (i.e. earnings stripping out inflation) remain flat at 1.7%.

Employment growth continues to slow...

Today’s data shows that employment in the UK has remained strong, but growth has slowed:

  • Employment rose by 49,000 (Exhibit 1) in the three months to August 2016, while this growth is positive, it is the slowest pace of quarterly jobs growth in 6 months. There are now 31.8 million people in employment in the UK.
  • The employment rate for those aged 16 to 64 was unchanged on the previous quarter at 74.5%. This is the joint highest since comparable records began in 1971.

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  • The growth in employment was driven by an increase in the number of employees (+63,000).
  • While the number of people in self-employment fell (- 3,000) , this is n contrast to the strong rises we saw over 2015.
  • There was also a fall in the number of people employed through government supported training and employment programmes (-18,000).
  • Growth was split among people in full-time employment (+26,000) while part-time employment grew by a similar number (+24,000).
  • There is some indication of underemployment in the labour market—13.6% (1.1 million) of people working part-time, were doing so as they could not find a full-time job.

...while ILO unemployment falls…

Today’s rise in employment was accompanied by a fall in the IL measure of unemployment.

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  • In total, 1.6 million people were unemployed in the three months to September (Exhibit 2). The unemployment rate fell to 4.8% - the lowest since July-September 2005. Encouragingly, the fall in unemployment was seen amongst people who had been out of work for both shorter and longer periods time.
  • In the three months to September, short-term unemployment (unemployed for up to 6 months) fell by 22,000 on the previous quarter.
  • At the same time, the number of people long-term unemployed (unemployed for over 12 months) and generally considered to be further away from the labour market, fell by 13,000.
  • The number of people unemployed for between 6 and 12 months remained broadly unchanged (-2,000).

...but the claimant count continues on its upward trend...

Today’s data also revealed that the number of people on the claimant count increased in October:

  • There were 803,258 people on the claimant count in October, an increase of 9,800 on September.
  • The claimant count is at its highest level since November 2012.
  • The number of people claiming out of work benefits has been increasing fairly steadily over the course of 2016, and is now around 67,000 higher than its low in February.

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  • Claimant count data is timelier than the ILO unemployment figures as it is based on administrative data meaning it can pick up on developments before the labour force survey. The other main difference between is that the ILO figure also includes people who are not claiming out of work benefits as they may be ineligible or simply choose not to claim.

...while youth unemployment falls …

Positively, youth unemployment also fell over the quarter:

  • In the three months to September, there were 591,000 16-24 year olds out of work and looking for work, a fall of 36,000 on the previous three-month period.
  • The youth unemployment rate is now 13.1%, down 0.6 percentage points on the previous quarter. The rate remains significantly lower than the recession peak of 22.5%, and is getting closer to the pre-crisis low of 11.6%.

...employment levels rise in half of the UK nations and regions...

  • Rising employment in half of the UK nations and regions delivered the UK-wide employment growth. (Exhibit 4 overleaf).
  • In the three months to September, the West Midlands saw the largest rise in employment (+72,000) followed by Yorkshire and the Humber (+33,000) and Wales (+19,000). 
  • There were also increases in Northern Ireland (+8,000) and the South East (+7,000). While employment was broadly unchanged in the North East (+3,000), London (- 2,000) and the East Midlands (-4,000).
  • Unemployment increased in the East (+29,000) and the North West (+15,000).

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…while unemployment falls...

The rise in employment across most regions and nations was accompanied by falls in unemployment:

  • In the three months to August, Scotland saw the most In the three months to September, the West Midlands saw the most substantial fall in unemployment (-22,000), followed by the North East (-20,000) and London and Scotland (both -14,000).
  • Unemployment also fell, although by less, in Yorkshire and the Humber (-7,000) and was broadly unchanged in the South West (-5,000), the South East and Northern Ireland (both -3,000), Wales (+3,000) and the East Midlands (+5,000).
  • While unemployment increased in the East (+29,000) and the North West (+15,000).

...and wage growth remains steady.

For those in work, wage growth is steady with growth above inflation continuing. But, pay growth is still below pre-recession levels:

  • Annual growth in regular pay (excl. bonus) in the private sector, was 2.7% in the three months to September, up from 2.4% in the three months to August, - this is the highest level of growth since September 2015. 
  • Total pay growth (incl. bonus) picked up slightly: in the three months to September: annual growth in total pay in the private sector stood at 2.5% from 2.4% in the three months to August.
  • Real average earnings growth (i.e. earnings stripping out growth in inflation) remained unchanged at 1.7% in the three months to September on the year.

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  • Though the inflation rate slowed slightly in October, it still remains higher than rates seen for much of the past two years. Inflation is expected to pick up through 2017, stretching people’s pay packets. Rises in productivity will be needed to ensure a sustainable pick -up in nominal wage growth and living standards going forward.

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