Following a revised increase of 200 (down from 7,000) in the claimant count unemployment in June, it declined 4,900 in July. The jobless rate held at a lowly 2.3 percent for a fifth month. The ILO measure showed unemployment up 25,000 over the three months to June. However the LFS jobless rate remained at 5.6 percent. Moreover, in June alone the jobless rate dropped to 5.5 percent from 5.8 percent. The ILO result matched the 5.6 percent jobless rate forecast of Bank of England staff for the three months to June, published in the August Quarterly Inflation report. Total average earnings in the three months to June increased only 2.4 percent, down from an annual 3.2 percent higher last time.
Today's data will be looked upon by the BoE MPC's hawks as additional proof that the Bank Rate should be hiked sooner than later. However, if the economy really is cooling, earnings could well slow again of their own accord. Given the slip in wages however, most on the MPC still see stronger wages as a prerequisite for meeting the 2 percent CPI target. Some city economists have speculated that uncertainty surrounding the May general election, which was expected to return a coalition government may have deterred hiring, and have forecast that unemployment will begin declining again.
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.