Labour Market In Decent Health

Today’s labour market data published by the Office for National Statistics suggest a slight improvement in the labour market in the three months to April. Employment rose on the quarter, and the pace of growth also increased compared to the three months to March. Unemployment edged slightly lower, while for those in work, pay growth remained relatively subdued over the three month period, compared to before the economic crisis began. However, there was some sign in a pick-up in monthly earnings in April, particularly in the private sector, potentially pointing to the first impact of the National Living Wage. But with sustained productivity growth still elusive, and slow global growth, risks remain for the labour market’s long-term health.

Employment growth accelerates somewhat...

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

  • Employment rose by 55,000 (Exhibit 1) in the three months to April 2016 on the previous quarter. Although this was a stronger pace of growth than the three months to March, growth remains slower than 2015.
  • The employment rate for those aged 16 to 64 was unchanged from the previous month at 74.2%, the joint highest since records began.
  • The increase in employment predominantly reflected growth in the number of self-employed (+42,000), with the number of employees fairly static (+4,000). Full-time employment rose (+63,000) and the number of people working part-time fell slightly (-8,000).



  • A separate data set also released today showed that, in the three months to March, businesses in the construction sector and human health & social work activities were the key drivers of jobs growth in the economy (jobs rose by +51,000 and +44,000 respectively). Professional scientific & technical services also made a very healthy contribution to jobs growth (+39,000).


… while unemployment edged lower...

This month’s data also show that unemployment edged lower (-20,000) in the three months to April.

  • In total, 1.67 million people are now out of work and looking for work. (Exhibit 3)
  • The unemployment rate ticked lower to stand at 5.0%, the lowest since August – October 2005. Looking at the length of time people are out of work, the improvement was concentrated in falls in long-term unemployment.
  • In the three months to April, the number of people shortterm unemployed (unemployed for up to six months) fell slightly (-6,000) on the previous quarter.
  • At the same time, medium-term unemployment (unemployed for between six and 12 months) was unchanged (0).
  • 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 17,000. youth unemployment falls slightly...

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

  • In the three months to April, there were 621,000 16-24 year olds out of work and looking for work, down 11,000 from the previous three-month period.
  • The youth unemployment rate is now 13.6%, down from 13.7% on the previous quarter and 16.0% a year ago.

Vacancies fall back from record highs

In contrast with the broadly positive news, after reaching a record high at the start of the year, vacancies fell in the three month to May compared with the previous threemonth period:

  • The number of vacancies stood at 749,000 in the three months to May, down 1.1% over the quarter (Exhibit 3). The largest contribution to the fall came from health and social work, where vacancies fell 6.8%.
  • Despite falling over the three month period, total vacancies are still up on 2.3% on the previous year


Employment creeps up in half of UK nations and regions…

The slight 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 April, London saw the largest rise in employment (+61,000) followed by the South East (+24,000) and the West Midlands (+22,000).
  • In the East Midlands (+11,000) in Northern Ireland, the Yorkshire & Humber (both +8,000) 
  • However, the number of people in work actually fell in Scotland (-48,000) and the East of England (-16,000).


…while unemployment fell in just under half of places

The slight fall in UK unemployment was driven by a handful of nations and regions, with little change elsewhere.

  • It was Scotland that saw the largest fall in unemployment in the three months to April (-11,000), followed by London (-8,000), the North East (-7,000) and Yorkshire and Humber (-6,000).
  • Unemployment was broadly unchanged in Wales (- 5,000) East of England (+3,000), South East (+2,000), the East midlands (0) and the North West and Northern Ireland (both -2,000).


Pay growth subdued

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 2.4% in the three months to April, unchanged from to the three months to March. However, on a monthly basis growth picked up to 2.7% from 2.0% in the previous month, possibly reflecting an impact from the introduction of the National Living Wage.
  • Total pay (incl. bonus) in the private sector slowed slightly. In the three months to April, annual growth in total pay stood at 2.1%, compared to 2.2% in the three months to March.  Persistently low inflation continues to support spending power at the tills – inflation has been below 1% for 18 months, and currently stands at 0.3%. And although our latest May forecast showed inflation rising above 1% in September this year, more recent inflation outturns have been lower than we expected.


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