February/March was another strong period for the UK labour market. However, employment growth was less than expected and, despite a diminishing pool of available workers, continues to have only a limited impact upon overall wages. To this end today's data will do little to boost the likelihood of a hike in Bank Rate this year.
March claimant count unemployment fell a further 20,700 on the month after a smaller revised 29,100 drop in February. The mid-quarter slide was the smallest since September 2014 but still the twenty-ninth in a row and left intact a strong downward trend that suggests that the demand for new hiring remains very robust. Indeed, the jobless rate on this definition dipped 0.1 percentage points for a fifth consecutive month to stand at just 2.3 percent.
The ILO statistics told a similarly upbeat story with a 76,000 decline over the three months to February that shaved its measure of the unemployment rate to 5.6 percent, its lowest reading since July 2008.
However, annual average earnings growth in the December-February period was only 1.7 percent, down a couple of ticks from last time and while regular pay accelerated from 1.6 percent to 1.8 percent, this was still historically very soft.
As a result, today's data should leave the BoE MPC doves happy enough. The economy as a whole looks to have enjoyed a good first quarter, notwithstanding last week's anaemic February industrial production report. But, with domestically generated inflation pressures still light and the global economic picture more than a little clouded, any hike in Bank Rate would appear to be as far away as ever.
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.