Judging by the latest official figures for the final quarter of 2017, published this morning by the Office for National Statistics, you clearly can’t have it all in the UK labour market at the moment. And the economic puzzles get even more perplexing.
Pay growth, the source of most of the bad news in recent months, picked up from 2.3% to 2.5% at the end of 2017 when measured by growth in average weekly earnings excluding bonuses. The corresponding real pay squeeze in turn eased, from a cut of 0.5% to 0.3%. But while this might suggest either a tightening in market conditions or an improvement in labour productivity, the opposite has happened.
The rate of job growth slowed in the final quarter of last year (the economy added only 88,000 net new jobs), unemployment increased by 46,000, the total number of hours worked fell by 0.3%, while growth in output per hour worked (i.e. labour productivity) dipped from 0.9% to 0.8%.
In other words, a labour market that struggled to boost pay when getting tighter, just saw pay strengthen when conditions got a bit weaker. This pattern is difficult to explain, though may become clearer as more data become available. However, it clearly adds to the conundrums facing economists, not least those at the Bank of England when they next consider if and when to raise interest rates.