Wednesday 21 February 2018

UK labour market gets even more puzzling

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.      

Wednesday 24 January 2018

Latest ONS Jobs Report offers a very mixed yet familiar picture of the UK labour market

The UK Office for National Statistics this morning published its latest release of data on the state of the labour market (which British commentators, influenced by the US BLS monthly equivalent, increasingly refer to as the official UK 'Jobs Report'). These latest (mainly rolling quarterly) data  relate mostly to the three months to November 2017.

The picture painted by the release is very mixed.

After a period of contraction in the overall size of the UK workforce, the number of people participating in the labour market expanded by 99,000 to 33.64 million in the latest quarter, mostly due to a fall of 79,000 in the number previously economically inactive. 

Employers who have recently been struggling to hire staff took full advantage of this, enabling employment to rise by 102,000 to 32.21 million, lifting the employment rate back to a joint record high of 75.3%. But with job creation only slightly higher than growth in the labour supply, unemployment is little changed (down just 3,000, at a rate of 4.3%). As a result, the degree of tightness in the labour market is also unchanged, although with the balance of job creation in the latest quarter tilted strongly toward full-time jobs for employees (up 173,000) and away from self-employment (down 82,000) the rate of growth of average weekly earnings excluding bonuses has ticked-up to 2.4%. Unfortunately, however, higher price inflation at the end of 2017 more than wiped out this improvement, intensifying the squeeze on real wages which fell by 0.5%. 

The resulting pattern is thus very familiar – record jobs and a low rate of unemployment but still less spending power for the average worker.