GB: Labour Market Report

Wed Nov 15 03:30:00 CST 2017

Consensus Actual Previous Revised
Claimant Count-Chg 2,300 1,100 1,700 2,600
Claimant Count 2.3% 2.3% 2.3%
ILO Unemployment 4.3% 4.3% 4.3%
Av. Earnings-Y/Y 2.1% 2.2% 2.2% 2.3%

The labour market performed much as expected in September/October which meant wage inflation remaining sluggish enough for some to cast doubt on the appropriateness of the BoE's November interest rate hike.

Claimant count joblessness edged up just 1,100 after a slightly larger revised 2,600 increase in September. The unemployment rate was unchanged at a lowly 2.3 percent. By contrast, the more reliable, but lagging ILO statistics showed the number of people out of work declining a further 59,000 in the third quarter, although this too left its measure of the unemployment rate steady at 4.3 percent, its lowest mark since the three months ending June 1975.

However, potentially significantly, third quarter employment was down 14,000, its first drop since the three months ended October 2016. This reduced the employment rate a tick to 75.0 percent.

Whatever the true underlying state of the labour market, wages growth is still essentially flat. Hence, average annual earnings growth last quarter was just 2.2 percent, a tick firmer than expected but still 0.1 percentage points below its May-August mark and historically very soft. Excluding bonuses, the rate was also 2.2 percent after 2.1 percent last time. The stickiness here means that the squeeze on household budgets continues and real regular wages are now 0.5 percent below their mark a year ago.

All in all, today's update paints a familiar picture of a still generally robust, but probably slowly weakening, labour market with wage growth stuck around the 2 percent mark. The BoE MPC doves will probably see the outcome as supportive of their call not to change policy at the start of the month but others will note a potentially dangerously small output gap. The bottom line is Bank Rate is unlikely to change again any time soon.

The Labour Market Report covers a number of key areas of the jobs market. Unemployment is updated on the basis of two separate surveys: the claimant count, which measures the number of people claiming unemployment-related benefits, and the lagging International Labour Organization's (ILO) measure that excludes jobseekers that did any work during the month and covers those people who are both looking and are available for work. Average earnings growth, a key determinant of inflation, is also updated.

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.