GB: Labour Market Report

Wed May 13 03:30:00 CDT 2015

Consensus Actual Previous Revised
Claimant Count-Chg -20,000 -12,600 -20,700 -16,700
Claimant Count 2.2% 2.3% 2.3%
ILO Unemployment 5.5% 5.5% 5.6%
Av. Earnings-Y/Y 1.7% 1.9% 1.7%

The labour market was again reasonably robust in March/April but still softer than expected and offered fresh indications that the economy has cooled somewhat since the start of the year.

April's claimant count fell only 12,600 on the month following a downwardly revised 16,700 drop in March. This was its smallest decrease since March 2013 and only enough to leave the jobless rate unchanged at 2.3 percent. April was the first month since October 2014 that the unemployment rate has not declined.

Meantime, the ILO data painted a similar picture with the number of people out of work in the first quarter falling only 35,000, its least marked decrease since June-August 2013. The unemployment rate on this measure was 5.5 percent.

However, in contrast to the moderating growth signals from the jobs side, wage developments moved in the opposite direction. First quarter average earnings growth was an annual 1.9 percent, up a couple of ticks from the December-February rate and stronger than expected. Similarly, excluding bonuses first quarter pay was up 2.2 percent on the year, a 0.3 percentage point increase versus last time.

Today's data are consistent with other recent evidence of a slowing economy. However, the big picture remains positive and some deceleration from the rapid expansion rates seen over much of 2014 was probably overdue. The pick-up in earnings growth may give the BoE MPC's hawks something to crow about but it remains historically low and anyway, most MPC members seem to see a rise here as a precondition for meeting the CPI target. Overall the labour market update does nothing to change a medium-term outlook for steady official interest rates although the picture here may become a little clearer with the release of the BoE's new Quarterly Inflation Report, due shortly.

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.