Summary: Has UK jobs market peaked?
Right, time for a recap.
Evidence that Britain’s long jobs boom has come to an end has emerged after official figures showed the number of people in work fell by 56,000 in the three months ending in October.
After an upswing stretching to 2012, the Office for National Statistics said the employment rate had fallen by 0.2 percentage points to 75.1%.
Unemployment also decreased by 26,000 to 1.43 million, but only because of a rise in economic inactivity, a category that counts people who have ceased to look for work. The jobless rate remained at 4.3%, its lowest since 1975.
The ONS also reported a slight pickup in earnings growth, but the 2.3% annual increase in the three months to October still meant pay was lagging behind inflation.
ONS statistician Matt Hughes said:
“Employment stayed close to its record high and while up on a year ago, declined compared with the previous three months. Unemployment also fell, but there was a rise in the number of people who were neither working nor looking for a job. Meanwhile the number of vacancies continues to grow, reaching a new record high.
“There has been a slight pick-up in pay growth in cash terms, which means that although earnings are still growing less than inflation, the gap has narrowed.”
Experts have pointed out that
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Low-paid workers are suffering particularly badly
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More young people have dropped out of the labour market altogether
- Vacancies are at a record high, suggesting firms are struggling to find qualified workers
- Real wages have now fallen for eight months in a row.
But economists also hope that the squeeze in real income may end early next year.
Here’s our news story on the data
That may be all for today! Thanks for reading and commenting. GW
Updated
Young women 'shut out of jobs market'
In another worrying move, the number of young people who aren’t in work or education has risen in the last quarter.
Dr Carole Easton OBE, the chief executive of the Young Women’s Trust, says many aren’t receiving the support they need to get into work.
“26,000 more young people are now economically inactive and out of education – a dramatic increase on the last quarter.
“Young women in particular are telling us they want to work but hundreds of thousands are getting shut out of the jobs market, including by a lack of convenient childcare and support. While the Government focuses on reducing its unemployment figures, 346,000 young women who are not included in the numbers are being left jobless and forgotten.
These charts show the situation:
The opposition Labour party has dismissed the government’s argument that the UK labour market is strong.
Shadow work and pensions secretary Debbie Abrahams says:
“Today’s figures are further evidence of Tory economic failure, only a day after inflation rose to its highest level in over five-and-a-half years.
“Both employment and real wages are falling, while the price of household essentials balloons, leaving millions of people worse off than they were in 2010.
“Eight million people in working households live in poverty, and many will struggle this Christmas as a direct result of this Government’s austerity policies.”
Ashwin Kumar, Chief Economist at the independent Joseph Rowntree Foundation, has dug into today’s data - and discovered that low-paid workers are suffering particularly badly from the weak pay growth.
Kumar says:
“Wages are yet again rising more slowly than prices. Combined with frozen benefits, 2017 has been a year of stress for family finances. But people working in retail and hospitality, who already face low wages, are being hit particularly hard.
In real terms, earnings have fallen by 1.4% since last year in these sectors, compared to a 0.4% fall for the average worker.
Today’s report also shows that the unemployment rate for women has hit a record low, at just 4.1%.
In contrast, 70.8% of women aged from 16 to 64 were in work, up from 69.8% for a year earlier. There has been an increase in women working full-time and part-time (unlike men, where the part-time cohort shrank in the last quarter).
The Office for National Statistics says:
The increase in the employment rate for women over the last few years has been partly due to ongoing changes to the State Pension age for women, resulting in fewer women retiring between the ages of 60 and 65.
Ian Brinkley, acting chief economist at the CIPD, the professional body for HR and people development, also suspects that Britain’s labour market is stalling.
He says:
“These figures suggest the UK’s employment engine has begun to splutter. The fall in the total number of people in work, down 0.2%, is primarily driven by a fall in full-time self-employment.
Coupled with a fall in unemployment, this appears to point towards constraints in the overall supply of labour rather than a decline in demand. There is a strong possibility that the continued expansion of the labour market has hit its ceiling. In response, employers would be wise to invest more in their existing workforce, especially in light of recent declines in the number of apprenticeships.
Vacancies at record high as firms struggle to find workers
Despite the drop in employment, the number of unfilled positions in the UK has hit a record high.
There were 798,000 job vacancies in the September-to-November quarter, which is the most since comparable records began in 2001, as this chart shows:
So why are firms struggling to fill these vacancies?
Dr John Philpott, Director of The Jobs Economist, says the supply of skilled labour is tailing off.
The rapid growth in labour supply of recent years has seemingly gone into the reverse. The main reasons for this are a sudden surge in student numbers and a fall in the number of citizens of the central and eastern European countries (the A8) that joined the EU in 2004.
In principle, this drop in available labour should be good news for unemployed jobseekers.
The steady unemployment rate may therefore indicate a lack of employability on the part of the remaining pool of unemployed.
The CBI, which represents British bosses, confirms that UK companies are still trying to hire staff. Their head of employment, Matthew Percival, says:
“The number of people in employment has fallen, but the unemployment rate remains low and there are still opportunities for job seekers with vacancies at a record high.
Today’s jobs reports shows that the number of public sector workers rose by 19,000 between June and September, to 5.49 milllion.
The ONS says:
The largest contributor to these quarterly and annual increases in public sector employment was the National Health Service.
But, the number of private sector workers dropped by 75,000 between June and September, to 26.59 million.
Britain’s cost of living squeeze could end early next year, reckons Ben Brettell, senior economist at Hargreaves Lansdown:
The pay squeeze continues for now, but with wages growing a little more strongly and inflation set to fall back in the new year, this looks like it’ll come to an end in the next few months.
We should remember, however, that the only true driver of real pay growth and rising living standards is productivity growth. This is something the UK has struggled with since the financial crisis, and as yet nobody seems to have solved the puzzle.
TUC: Real wages have shrunk for eight months running
TUC General Secretary Frances O’Grady doesn’t see any festive cheer in today’s labour market report.
She says:
“2017 has been a bleak year for living standards.
“Real wages have now fallen for the last eight months in a row. And working people will be worse off this Christmas than they were a decade ago.
“Boosting pay packets should be a priority for the government - not a side issue.”
The Minister for Employment, Damian Hinds, claims that the UK labour market is still strong - even though real wages are still falling.
Hinds says:
“We’re ending the year on a strong note with figures showing the unemployment rate has fallen every month in 2017, and is now at the lowest it’s been in over 40 years.
“Employment is at a near-record high, and there are over 3 million more people in work now compared to 2010 – that’s more than the population of Greater Manchester. Universal Credit is helping people get into work quicker, and ensuring they get more money in their pockets for every hour they work.
“Universal Credit supports both the unemployed and the low paid, as people don’t have to end their benefit claim when they find a job. This is especially important at this time of year, when many people take on temporary seasonal work.”
Expert: UK labour market has peaked
Geraint Johnes, Research Director at the Work Foundation and Professor of Economics at Lancaster University Management School, says today’s jobs report is packed with concerns:
The latest labour force statistics provide further evidence that the labour market has peaked and is now starting to turn down. Employment fell by some 56000 over the quarter to October. While there was a small increase in the number of full-time employees, there was a large fall (some 65000) in the number of full-time self-employed workers. Unemployment, meanwhile, continued to fall, and now stands at 4.3%. The simultaneous fall in employment and unemployment is possible because there has been a large increase (115000 over the quarter) in the number of economically inactive.
“There have been large falls in employment in the distribution sector (38000) and in information and communication (37000). Meanwhile numbers employed in professional, scientific and technical fields and in administration and support have increased.
“The three-month average measure of total weekly pay has increased to 2.5% (from 2.3% at the time of the last release). This is encouraging, but should be viewed alongside two further observations. First, wage growth remains well below the rate of growth of prices, so real wages continue to fall. Secondly, the single-month figure, while less reliable, is more modest – it has fallen to 2.3% from 2.8% last time around.
So the growth in the three-month measure is largely due to a spike in September that has not fed through into October. Low, and stagnant, wages remain a problem.”
Jobs report: Snap reaction:
Jeremy Cook of foreign exchange firm World First isn’t impressed by today’s jobs report
Shorter UK jobs numbers: those with jobs are getting poorer at a slightly slower rate than those without, and now there are 56,000 more of the latter
— WorldFirst (@World_First) December 13, 2017
Ed Conway of Sky News fears that the jobs market may be stalling...
Employment rate has started to stall, on basis of recent jobs figs. Hardly a disaster, but may suggest UK labour market finally turning pic.twitter.com/36l7vCEbq8
— Ed Conway (@EdConwaySky) December 13, 2017
He also points out that real wages have now been falling since the spring
Real wages across UK still shrinking, mainly thanks to higher inflation. Here's the latest data from the @ONS pic.twitter.com/tmdUwEC99W
— Ed Conway (@EdConwaySky) December 13, 2017
Duncan Weldon of the Resolution Group is disappointed that wages aren’t rising faster, given Britain’s unemployment rate is a 42-year low.
The UK Philips Curve. Still broken.
— Duncan Weldon (@DuncanWeldon) December 13, 2017
Jobs engine looks to be spluttering.
— Duncan Weldon (@DuncanWeldon) December 13, 2017
Wages a touch healthier - but well below inflation.
— Duncan Weldon (@DuncanWeldon) December 13, 2017
Scoring this as “not good”.
— Duncan Weldon (@DuncanWeldon) December 13, 2017
Unemployment: the key charts
This is not a great jobs report , despite the fall in unemployment:
Between May to July and August to October 2017 both employment and unemployment fell, while economic inactivity went up: https://t.co/iRqpSW7D11 pic.twitter.com/TANcC9u7Vy
— ONS (@ONS) December 13, 2017
Worryingly, the number of people receiving unemployment benefits (the claimant count) has risen by 5,900 in November, to 818,000.
October’s figures have been revised higher too, to 6,500.
Updated
Pay growth up, but real wages are still shrinking
British workers are still suffering falling real wages, despite a pick-up in pay in the last quarter.
Today’s jobs report shows that pay, including bonuses, rose by 2.5% in the last quarter, up from 2.2% last month.
But basic pay (excluding bonuses), only rose by a more modest 2.3% in the August-to-October quarter.
With inflation hitting 3% in September and October, and spiking to 3.1% in November, that means people are effectively experiencing a pay cut.
Updated
UK employment total falls again
Breaking! The number of people in employment across the UK has fallen, for the second month in a row.
There were 56,000 fewer people in work in the July-October quarter, compared to the previous three months. That’s the biggest drop since May 2015, taking the total number of people in work down to 32.08 million.
But the number of people classed as unemployed has also dropped in the last quarter, by 26,000, to 1.43 million. That leaves the unemployment rate at a 42-year low of just 4.3%, the same as last month.
Importantly, more people have simply dropped out of the labour force altogether, and are classed as ‘economically inactive’.
Here are the key points from the Office for National Statistics:
- The UK unemployment rate fell marginally (by 0.1 percentage points) to 4.3% in the three months to October 2017, compared with the previous quarter, to a joint lowest unemployment rate since 1975.
- The UK employment rate fell by 0.2 percentage points to 75.1% in the three months to October 2017 compared with the previous quarter.
- The level of employment fell by 50,000 for men and by 6,000 for women.
More to follow!
The pound is creeping up this morning, on hopes that today’s jobs report will show that pay growth (including bonuses) has jumped to 2.5% in the last quarter.
Sterling has gained 0.2% against the US dollar to $1.334, and is a little higher against the euro too at €1.136.
But Lukman Otunuga, research analyst at FXTM, reckons the pound would suffer if today’s figure are disappointing:
Although Britain’s unemployment rate remains encouraging, sentiment could easily take a hit if wage growth fails to meet market estimations.
A situation where pay growth fails to pick up is likely to continue squeezing consumers, especially in view of inflation jumping to its highest level in almost six years at 3.1%.
Economist Rupert Seggins has created some useful charts to explain today’s labour market report (which is released in 45 minutes):
1. UK unemployment rate figures today - consensus is for a fall to 4.2%, which would be the lowest rate since the 3 months to May 1975. pic.twitter.com/3SHy1Rub9z
— Rupert Seggins (@Rupert_Seggins) December 13, 2017
2. Yesterday's inflation figures mean the pay squeeze is set to continue. Real regular pay set to fall c. 0.7%y/y (-0.6%y/y if you prefer CPIH). pic.twitter.com/UVjVkgI8iE
— Rupert Seggins (@Rupert_Seggins) December 13, 2017
The big news last month was the 14,000 person fall in employment. Consensus is for a fall of 48,000 in October. pic.twitter.com/asbnQWfCdm
— Rupert Seggins (@Rupert_Seggins) December 13, 2017
4. A sizeable 117,000-person rise in inactivity last month. More students and more people long-term sick. Meanwhile no's of retired & people looking after family fell. pic.twitter.com/9aOIv3uXn9
— Rupert Seggins (@Rupert_Seggins) December 13, 2017
Updated
In the City, shares in Dixons Carphone have jumped by 7.5% in early trading after it reported its best ever Black Friday trading.
That makes amends for a 60% tumble in pre-tax profits over the six months to 28 October, when Dixons Carphone suffered from a slowdown in mobile phone sales.
CEO Seb James tweets that earnings growth should pick up over the crucial Christmas period:
Half year results out today good like for like trading profits impacted by non trading one off items flagged in August. We make most of our profit in the second half and are forecasting to be in line with market. All in all thank you for your heroic work this year!
— Sebastian James (@DCSebJ) December 13, 2017
Mike van Dulken of Accendo Markets is hoping for a cheering unemployment report today:
UK Unemployment (9:30am) is expected to drop to a fresh 42-year low of 4.2%, while Average Earnings (incl. bonus) accelerate to a 2017 high of 2.5% (still shy of inflation, which hit a new multi-year high of 3.1% yesterday) and the ex-bonus print holds firm at 2.2%.
Here are the City consensus forecasts for today’s UK jobs report:
The agenda: UK unemployment report
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain’s cost of living squeeze intensified yesterday, as inflation spiked unexpectedly to a six-year high of 3.1%.
Today, we discover if wages are catching up, with the publication of the latest UK labour market report. Economists suspect that higher bonuses may have pushed earnings growth up to 2.5% - slightly closing the gap with inflation.
Basic pay is probably still lagging behind, though, at just 2.2% per annum in the last three months. That would leave many workers struggling to keep pace with rising prices.
The City will also be looking to see whether Britain’s economy created more jobs in the July-October quarter. A month ago, we saw the first drop in employment since the Brexit vote, triggering fears that the labour market is losing momentum.
It’s also possible that the unemployment rate could hit a new four-decade low of just 4.2%.
Jasper Lawler of London Capital Group says traders will focus on the earnings figures.
The important element here will be hourly wages, which could give an indication as the extent to which UK household purses are being squeezed. Average hourly wages are expected to be 2.5% in the three months to October, which is a respectable 0.3% increase from the three months to September.
This would represent a rare closing in the gap since Brexit, between the cost of living and wage growth.
The report is also expected to show resilience in other areas of the labour market, as well such as a further decline in the rate of unemployment. Yet while the UK jobs market may put on another showing of strength, the pound could struggle to react positively for the same Brexit jitter reasons that weighed on the pound following yesterday’s inflation report.
In the City, technology retail group Dixons Carphone and holiday group TUI are reporting results.
After European traders have headed home, America’s Federal Reserve will (probably) raise US interest rates. It will also be Janet Yellen’s final press conference as Fed chair, following Donald Trump’s decision not to reappoint her.
Royal Bank of Canada expect little excitement though:
Yellen’s press conference should prove to be a non-event given her recent testimony in Congress and that she will soon be stepping down once Powell is confirmed. The bigger question therefore is whether the Fed will significantly alter its economic and rates projections.
Our US colleagues’ view is that they would prefer to wait until March to make significant upgrades when they are likely to be in a better position to model the impact of the looming tax plan.
The agenda
- 9.30am GMT: UK unemployment statistics
- 10am GMT: Eurozone industrial production data for October
- 1.30pm GMT: US inflation data for November
- 7pm GMT: US Federal Reserve interest rate decision
Updated
