Employment Nudges Up, But Labour Market Remains in Rude Health

Although today’s release covers two months of the postreferendum period, it is still too early to make any assumptions about the effect of the EU referendum vote on the labour market as the labour market tends to lag developments in the real economy by several months.

Employment rose over the quarter to August to 31.8 million and the employment rate was 74.5% - remaining at the joint highest since comparable records began in 1971. Meanwhile, unemployment rose by10k, but the unemployment rate remained at an 11 year-low of 4.9%.

Wage growth increased slightly over the three months to August with annual regular pay growth reaching 2.3%. However, real average earnings (i.e. earnings stripping out inflation) rose at their slowest pace since February 2015 (1.7%).

Employment rises at a slower pace...

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

  • Employment rose by 106,000 (Exhibit 1) in the three months to August 2016, which is a healthy increase but slower than the average rate of quarterly jobs growth seen this year. There are now 31.8 million people in employment in the UK.
  • The employment rate for those aged 16 to 64 rose by 0.1 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 (+121,000), while there was a fall in the number of people employed through government supported training and employment programmes (- 27,000).

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1

  • While self-employment also grew (+7,000), growth was relatively small compared to the stronger rises seen in 2015.
  • Part-time employment grew (+66,000) faster than fulltime employment (+40,000), with 70% of part-time workers not wanting a full-time job.

... as unemployment nudges up, but the unemployment rate remains at an 11 year low…

  • Alongside the rise in employment in this month’s data, unemployment also crept up a little (+10,000).
  • In total, 1.6 million people were unemployed in the three months to August (Exhibit 2). The unemployment rate remains at an 11-year low of 4.9% meaning the overall picture in the labour market is resilient.
  • Simultaneous increases in employment and unemployment are possible because of changes in the population and the number of people described as ‘economically inactive’. People classed as economically inactive are not in work and do not want, or are not able, to work.

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Looking at the data in a little more detail, the rise in unemployment was concentrated amongst those people who had been out of work and looking for work for shorter periods of time.

  • In the three months to August, the number of people unemployed for between 6 and 12 months increased by 16,000.
  • At the same time, short-term unemployment (unemployed for up to 6 months) increased by 12,000 on the previous quarter.
  • In contrast, the number of people long-term unemployed (unemployed for over 12 months) and generally considered to be further away from the labour market, actually fell by 17,000.

...while youth unemployment also edged up...
Youth unemployment also edged up over the quarter, but remained way below its peak recession levels:

  • In the three months to August, there were 624,000 16-24 year olds out of work and looking for work, an increase of 7,000 on the previous three-month period.

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  • The youth unemployment rate is now 13.7%, up 0.2 percentage points on the previous quarter, but 1.0 percentage points lower than a year ago and is also 8.8 percentage points lower than the recession peak.

...as the claimant count shows no material change…

The data published today also revealed that the number of people on the claimant count was broadly unchanged in September:

  • The claimant count rose by 700 to 771,600, between August and September.
  • The claimant count is at a historically low level. Economists had expected the number of benefit claimants - which is considered to be a potential early warning sign of an economic downturn - to rise by 3,000.

...and vacancies increase slightly…

After falling at the start of the year, we have seen slight increases in the number of vacancies over the last couple of months. Today’s data reveals:

  • The number of vacancies stood at 749,000 in the three months to August, up 0.2% on the quarter and up 0.9% on the year.
  • There are now 2.6 unemployed people per job—well below the recession peak of almost 6.0 unemployed people per job in 2008.

...while employment rises across three quarters of UK nations and regions…

Rising employment in the majority of UK nations and regions delivered the UK-wide increase. (Exhibit 4).

  • In the three months to August, the West Midlands saw the largest rise in employment (+45,000), followed by the East Midlands (+37,000), Yorkshire and the Humber (+27,000) and Northern Ireland (+14,000).
  • There were also small increases in the South East (+10,000), North East (+8,000) and East (+6,000), while employment was broadly unchanged in Wales (+5,000) and the North West (+4,000)
  • Employment fell in London and the South West (both - 21,000) and Scotland (-8,000).

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…and unemployment also edges up in some regions...

The rise in employment across most regions and nations was accompanied by slight increases in unemployment, which can be attributed to an increase in the active labour force.

  • In the three months to August, Scotland saw the most substantial fall in unemployment (-25,000), followed by the North East (-9,000).
  • Unemployment was broadly unchanged in Wales (- 5,000), Northern Ireland (-3,000), the South East (0), East Midlands (+2,000) and the West Midlands (+3,000).
  • Unemployment increased in London (+13,000), the East (+11,000), Yorkshire and the Humber (+9,000), the North West (+8,000) and the South West (+6,000).

...but wage growth remains lacklustre.

For those in work, wage growth remains subdued.

  • Annual growth in regular pay (excl. bonus) in the private sector, was 2.4% in the three months to August, up from 2.3% in the three months to July, and remaining in line with its average since the beginning of the year.
  • Real average earnings (i.e. earnings stripping out inflation) rose at their slowest pace since February 2015 (1.7%).
  • But, total pay growth (incl. bonus) fell: in the three months to August, annual growth in total pay in the private sector stood at 2.3% from 2.5% in the three months to July.
  • Real total pay growth fell to 1.8% on the year in the three months to August from 2.0% in the three months to July.

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  • Following the sharp depreciation in sterling, 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 wage growth and living standards going forward.

 

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