GB: Labour Market Report

Wed Mar 18 04:30:00 CDT 2015

Consensus Actual Previous Revised
Claimant Count-Chg -30,000 -31,000 -38,600 -39,400
Claimant Count 2.4% 2.4% 2.5%
ILO Unemployment 5.6% 5.7% 5.7%
Av. Earnings-Y/Y 2.2% 1.8% 2.1%

The labour market put in another solid performance in January/ February but, in contrast to earlier months, strong employment gains failed to translate into a pick-up in wage growth.

Claimant count unemployment dropped a further 31,000 on the month in February. This largely matched market expectations but followed a slightly steeper revised 39,400 decline at the start of the year. The unemployment rate duly extended its downward trend, dipping an additional tick to just 2.4 percent.

The ILO data were similarly buoyant. Hence, over the three months to January joblessness on this definition decreased 102,000 which put the jobless rate at 5.7 percent. Over the same period, total employment rose a very respectable 143,000 of which, significantly, full-time positions were up some 98,000. The employment rate (73.3 percent) climbed 0.3 percentage points to hit a new record high

However, wages surprisingly cooled. Headline average earnings growth in November-January was 1.8 percent, still comfortably above January's 0.3 percent annual inflation rate, but down from 2.1 percent in the fourth quarter. Indeed, in January alone the yearly increase was just 1.1 percent, less than half December's 2.4 percent rate. At the same time 3-monthly earnings growth excluding bonuses slipped to 1.6 percent from 1.7 percent.

The BoE MPC should look favourably on today's report. The economy looks to have started 2015 on a bullish note but inflation pressures have not developed as expected. The likelihood of a hike in Bank Rate this year has just diminished somewhat.

Labour market statistics measure different aspects of work and jobs and provide an insight into the economy. The statistics cover labour force participation as well as ILO unemployment and claimant count unemployment. The statistics also show any earnings and benefits they receive.

The International Labor Organization's measure of unemployment, excludes jobseekers that did any work during the month and covers those people who are looking for work and are available for work. The ILO unemployment rate is the number of people who are ILO unemployed as a proportion of the resident economically active population of the area concerned.

The claimant count measures the number of people claiming unemployment-related benefits (jobseekers' allowance since October 1996). The claimant count is not an alternative measure of unemployment as it does not meet the internationally agreed definition of unemployment specified by the International Labour Organisation (ILO). However, it is regarded as more up to date and reflective of current conditions by the markets.

Average earnings is a key indicator of inflationary pressures emanating from the labour market and is widely used by those involved in economic policy formulation.

The employment data give the most comprehensive report on how many people are looking for jobs, how many have them and what they are getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.

The employment statistics also provide insight on wage trends, and wage inflation is high on the Bank of England's list of enemies. Bank officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Bank to maintain a more accommodative monetary policy. If inflation is a problem, the Bank is limited in providing economic stimulus - it must stay within range of its mandated inflation target.

By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are more likely to decline - boosting up bond and stock prices in the process.