GB: Labour Market Report

Tue May 15 03:30:00 CDT 2018

Consensus Actual Previous Revised
Claimant Count-Chg 7,500 31,200 11,600 15,700
Claimant Count 2.4% 2.5% 2.4%
ILO Unemployment 4.2% 4.2% 4.2%
Av. Earnings-Y/Y 2.7% 2.6% 2.8%

The March/April labour market data were mixed but, in general, in keeping with sustained limited upside pressure on wages.

The claimant count statistics showed a hefty 31,200 increase in the number of people out work last month. Following an upwardly revised 15,700 rise in March, this was enough to lift the jobless rate another tick to 2.5 percent. These data need to be treated with caution but an upward trend in recent months is clear enough.

By contrast, the first quarter ILO statistics were much more upbeat. Hence, in addition to a 197,000 leap in employment (the largest since the fourth quarter of 2015), unemployment fell a sizeable 46,000. This left the jobless rate at 4.2 percent, in line with expectations. That said, the single month rate for March jumped 0.4 percentage points to 4.4 percent and could presage rather less upbeat news to come. A 16,000 decline in vacancies, the first fall since the three months to July last year, was consistent with this view.

In any event, wages remain subdued. Annual growth of wages in January-March was only 2.6 percent, below market expectations and 0.2 percentage points short of their December-February outturn. The slowdown was essentially attributable to bonuses as the ex-bonus rate edged up from 2.8 percent to 2.9 percent but this hardly constitutes any significant pick-up. Meantime, the annual real ex-bonus rate climbed 0.2 percentage points to 0.4 percent, helped by falling inflation. This suggests some limited let-up in the longstanding squeeze on household budgets.

Following last week's unchanged BoE MPC announcement and accompanying dovish Quarterly Inflation Report, today's labour market data are unlikely to dent speculation that Bank Rate is likely to be on hold for some time. The real economy may be holding up a little better than expected but wage pressures are still not really responding to a tight labour market and some of the more forward-looking indicators are beginning to look a little ragged.

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.