Labour Market Growth Softening

Although employment rose, the pace of growth is slower than it was in 2015.

Unemployment was broadly unchanged, while for those in work, pay growth remained relatively subdued compared to before the economic crisis began.

The key to turning this around is boosting productivity. This is particularly important as inflation, which impacts on people’s purchasing power at the till, is likely to pick up gradually this year.

Employment growth slows...

Today’s data show a modest rise in number of people in work. 

  • Employment rose by 44,000 (Exhibit 1) in the three months to March 2016 on the previous quarter. Although this was stronger than the three months to February, growth this year has been slower than 2015. 
  • The employment rate now stands at 74.2%, the highest since records began. Some of the rise in employment can be attributed to the increase in retirement age for women from 60 which has meant people remained in employment who would have otherwise retired. The employment rate of women (69.2%) is the highest since records began. 
  • The employment rate for men also rose, reaching its pre-recession rate (79.3%). 


  • The increase in employment on the quarter reflected growth in the number of employees (+27,000) and in the self-employed (+20,000). Full-time employment rose (+47,000) and the number of people working parttime remained broadly unchanged (-3,000).
  • Number of self-employed people also rose in the three months to March (+20,000), with the growth in self-employment coming from full-time positions.

Vacancies fall back from record highs

After reaching a record high at the start of the year, vacancies have started to fall.

  • The number of vacancies stood at 745,000 in the three months to April, down 2.4% over the quarter (Exhibit 2 overleaf).



  • This was the first fall in vacancies since the middle of 2015 and alongside slower employment growth suggests a softening in labour market improvements.

...while unemployment shows little change...

This month’s data also shows a fall in unemployment was broadly unchanged (-2,000).

  • In total, 1.69 million people are now out of work and looking for work. (Exhibit 3)
  • The unemployment rate stands at 5.1%, unchanged for the last five months.


Looking at the length of time people are out of work, in the three months to March there was only a fall in those unemployed for twelve months or longer.

  • In the three months to March, the number of people short -term unemployed (unemployed for up to six months) was unchanged on the previous quarter.
  • At the same time, medium-term unemployment (unemployed for between six and 12 months) increased by 20,000.
  • 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, fell by 22,000.

...but youth unemployment creeps up

Turning to look at unemployment amongst young people, this has remained broadly unchanged but is lower than last year.

  • In the three months to March there were 631,000 16-24 year olds out of work and looking for work, up 6,000 on the previous quarter.
  • The youth unemployment rate is now 13.7%, unchanged on the last three months but down from 15.9% a year ago.

Employment increases in seven out of twelve UK nations and regions...

The employment growth seen across the UK as a whole reflected rises in the number of people in work in over half of the nations and regions. (Exhibit 4 overleaf)

  • In the three months to March, the South East saw the largest rise in employment (+43,000) followed by London (+37,000), Wales (+27,000) and the West Midlands (+23,000).
  • Employment levels changed little in in the North West (+8,000), Northern Ireland (+7,000) and the East Midlands (+4,000)
  • However, the number of people in work fell in Scotland (53,000), the East of England (-19,000) the South West (13,000) and the North East (-12,000).


…while unemployment fell in just under half of regions

The fall in UK unemployment was driven by just under half the nations and regions.

  • London saw the largest fall in unemployment in the three months to March (-20,000) 
  • There was little change in the number of unemployed in the East of England (-6,000), Wales (-5,000), the South East, the North East (both -4,000), Northern Ireland (+4,000), the North West (+2,000), the East Midlands (+1,000) and in Yorkshire and the Humber (0). 
  • In contrast, the number of people out of work and looking for work increased slightly in the West Midlands and Scotland (both +8,000).


Pay growth remains sluggish

For people in work, today’s data reveals that pay growth remains sluggish compared to before the crisis. (Exhibit 5)

  • Annual growth in regular pay (excl. bonus) in the private sector, was 2.3% in the three months to March, a slight fall compared to the three months to February when pay grew by 2.5%. 
  • Total pay (incl. bonus) picked up a touch. In the three months to March, annual growth in total pay in the private sector stood at 2.1%, compared to 2.0% in the three months to February. 
  • The low inflationary environment continues to support spending power at the tills – inflation has been below 1% for 17 months. However, our May forecast shows inflation edging up over the course of this year and this means a pickup in productivity is needed to help real wage growth increase at a faster pace.

Follow us on LinkedIn: