UK jobs market sending out mixed signals but no need yet to ring ‘overheating’ alarm bells

You can come up with almost any narrative you want from the latest UK job market figures released earlier this morning by the Office for National Statistics (ONS), mostly covering the three months July to September 2015.

The good news story is a very healthy quarterly rise of 177,000 (to 31.21 million) in the number of people in work, taking the employment rate to yet another new record high of 73.7%, and a big drop of 103,000 (to 1.75 million) in the number unemployed, lowering the unemployment rate to 5.3%, only slightly higher than before the recession.

And yet there is also more than enough disappointing news for the pessimist to latch onto. Most of the rise (82%) in total employment in the latest quarter is in part-time jobs with the result that total hours worked in the economy have fallen (by 0.1%). Meanwhile the number of unfilled job vacancies is, as the ONS says, ‘little changed’, albeit still at a very decent level of around 740,000. This combo of falling hours and stable vacancies may help explain why the rate of average weekly regular pay growth (i.e. excluding bonuses, the best regularly available official measure of underlying nominal wage inflation) has fallen to 2.5% in the year to September (down from the 2.8% figure recorded for the year to August). This is still very good when set against zero consumer price inflation but suggestive of an overall easing in the strength of demand for labour.

Some amount of demand easing might also account for a slight rise of 3,300 between September and October in the number of people claiming unemployment related welfare benefits. However, as former senior member of the Government Economic Service and labour market expert Bill Wells has noted this morning, the headline claimant count total might be being affected by administrative delays associated with the introduction of the new out of work Universal Credit system (the number of unemployed people claiming the long standing Job Seeker’s Allowance benefit fell by 11,200 between September and October).

What therefore does an overall reading of these data tell us? My view is that while we can continue to take comfort in the general good health of the UK employment situation these latest data do not provide evidence to suggest the labour market is overheating. Neither do they lend weight to the view that the Bank of England should start to raise interest rates sooner rather than later. For the time being at least the alarm bells can remain silent.