Wednesday 12 August 2015

Further signs of hiatus in UK jobs recovery

The Office for National Statistics (ONS) has this morning released the latest set of UK labour market data, mostly covering the three months April to June 2015.

Although these quarterly data refer to the spring and early summer they convey a picture befitting August and the summer holiday season, since nothing much appears to have happened.

Admittedly, the number of people in work fell by 63,000 in the quarter to 31.03 million, while the number unemployed increased by 25,000 to 1.85 million. But as the ONS notes the employment rate (73.4%), the unemployment rate (5.6%) and the economic inactivity rate (22.1%) were all ‘little changed’.

Nonetheless, this is the second consecutive month of weak employment data, which suggests the UK jobs recovery ran out of steam in the spring. What’s less certain is whether this represents a temporary pause, perhaps due to employers’ caution over hiring around the time of the General Election in May, or a clear break in the previous trend of sharply falling unemployment. Either way it now looks as though it will take a little longer than previously expected for unemployment to fall back to the pre-recession rate (5.2%).

The most disappointing feature of the latest data is that the apparent hiatus in the jobs recovery is not offset by faster pay growth - the rate of growth of regular pay, excluding bonuses, for employees remaining unchanged at 2.8% - which might have indicated a pick-up in labour productivity. A combination of jobs standstill and lack of momentum in pay therefore makes this the least positive set of UK labour market figures for some considerable time.