GB: Labour Market Report

Wed Nov 11 03:30:00 CST 2015

Consensus Actual Previous Revised
Claimant Count-Chg 0 3,300 4,600 500
Claimant Count 2.3% 2.3% 2.3%
ILO Unemployment 5.4% 5.3% 5.4%
Av. Earnings-Y/Y 3.2% 3.0% 3.0%

Overall the labour market was a little softer than expected in September/October and certainly not strong enough to reawaken any talk of a hike in official interest rates anytime soon.

Claimant count unemployment was up a larger than anticipated 3,300 in October but this was effectively offset by a near-equivalent downward revision to September's increase which now stands at just 500. Joblessness increased a relatively mild 5,000 over the last three months although this still compares unfavourably with a 7,800 decline during May-July and was the first quarterly gain in nearly three years. Even so, the unemployment rate in October was steady, as expected, at 2.3 percent.

Meantime, according to the ILO survey the number of people out of work dropped some 103,000 in the third quarter, a steep enough decline to nudge its version of the jobless rate a tick lower to 5.3 percent. This was its lowest mark since March-May 2008 and just shy of market expectations and the BoE's latest forecast.

However, wage developments were surprisingly soft. Hence, annual average earnings growth last quarter was only 3.0 percent, unchanged from its previous mark and, more significantly, regular pay slowed from 2.8 percent to 2.5 percent. Moreover, within the latter figure, the standalone September rate was just 1.9 percent.

As is often the case there is something for the BoE MPC's doves and hawks alike in today's report. The labour market has already tightened enough to produce some recruitment difficulties in selected areas but manufacturing employment intentions have weakened markedly and, crucially, wage pressures in the aggregate remain largely subdued. Last week's BoE Quarterly Inflation Report seemingly ruled out any near-term hike in interest rates and this report does nothing to alter that scenario.

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.