GB: Labour Market Report

Wed Jan 24 03:30:00 CST 2018

Consensus Actual Previous Revised
Claimant Count-Chg 5,400 8,600 5,900 12,200
Claimant Count 2.3% 2.4% 2.3%
ILO Unemployment 4.3% 4.3% 4.3%
Av. Earnings-Y/Y 2.5% 2.5% 2.5%

The UK labour market data were inconclusive in November/December with some conflicting signals from joblessness and no significant change in wages growth.

The more up to date, but less reliable, claimant count figures showed unemployment rising a further and larger than expected 8,600 in December following an upwardly revised 12,200 gain in November. The latest increase was enough to lift the jobless rate from 2.3 percent, the value posted every month since last April, to 2.4 percent, a level not seen since February 2015.

However, the ILO statistics found unemployment in the three months to November falling 3,000 versus the previous three months, leaving its version of the jobless rate unchanged at 4.3 percent. This matched the market consensus. Moreover, employment over the same period jumped fully 102,000, its largest advance since May-July 2017 and sufficient to raise the employment rate by 0.2 percentage points to 75.3 percent, equalling the record high. Additionally, vacancies climbed 17,000 to 810,000, a new record peak.

Even so, the apparent buoyancy of employment did little to impact wages. Average annual earnings growth in the three months to November was 2.5 percent, in line with market expectations and unchanged from the previous period. Excluding bonuses, the rate was 2.4 percent, up just a tick from last time. As a result, real regular pay over the same three months fell an annual 0.5 percent which, after a 0.4 percent drop in the three months to October, simply implies a still tighter squeeze on household budgets.

Accordingly, there is (again) something for the BoE MPC's doves and hawks alike in today's report. Overall, it probably suggests that the economy is holding up quite well and that labour shortages are becoming more acute. However, the stickiness of wages means that, for now at least, domestically generated inflation pressures remain relatively benign.

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.