The Office for
National Statistics (ONS) has this morning released the latest set of UK labour
market data, mostly covering the three months May to July 2014.
Although the UK
labour market continues to improve, there are tentative signs in the latest
figures that the balance between job creation and pay growth may have started
to shift. The increase of 74,000 in the number of people in work (which now
totals 30.6 million) is less than half that recorded in the previous quarter
and the lowest quarterly increase for a year. Moreover, in contrast with recent
quarters almost all the net new jobs (92%) were part-time. Pay meanwhile
ticked-up a bit with growth in regular pay (excluding bonuses) rising from 0.6%
to 0.7%, the gap between regular pay growth and CPI inflation (the real pay
squeeze) narrowing from -1.3% to -0.9%.
Despite the slower
pace of job creation, unemployment fell faster than in the previous quarter, in
large part because of a sharp, and welcome, fall of 106,000 in youth
unemployment. The number of unemployed 16-24 year olds (excluding those in
full-time education) is now below half a million (489,000), though the
unemployment rate for this group (14.2%) is still more than twice the overall
average rate (6.2%, now at a six year low). It therefore appears that the
jobless, and especially the young jobless, are doing better in accessing the
jobs being created.
The latest labour
market data thus add to the quandary facing the Bank of England over when to
start to raise interest rates. The unemployment and pay data point to tighter
conditions but the jobs data suggest an easing in the pace of the jobs
recovery, which might suggest improved prospects for labour productivity.
Overall, therefore, these data do not suggest any immediate need for an
interest rate rise.
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