GB: Labour Market Report

Tue Jun 12 03:30:00 CDT 2018

Consensus Actual Previous Revised
Claimant Count-Chg 11,300 -7,700 31,200 28,200
Claimant Count 2.5% 2.5% 2.5%
ILO Unemployment 4.2% 4.2% 4.2%
Av. Earnings-Y/Y 2.6% 2.5% 2.6%

The labour market proved surprisingly robust in April/May but still not strong enough to prompt any pick-up in wages growth.

The claimant count survey found an unexpected 7,700 drop in the number of people out of work last month. This followed a smaller revised, but still sizeable, 28,200 increase at the start of the quarter and was the first decline since January. The jobless rate was unchanged at an historically very low 2.5 percent, although even this still matched its highest post since November 2014.

Meantime, the ILO statistics showed another tidy 38,000 decrease in unemployment in the three months to April which left the rate steady at 4.2 percent, in line with expectations and equalling its lowest outcome since the first quarter of 1975. Employment was up a solid 146,000 and there was also good news on vacancies which rose 2,000 and so reversed the previous period's fall.

However, not for the first time, pay failed to respond. Hence, total weekly earnings grew at an annual rate of 2.5 percent in the three months to April, down a tick versus the first quarter pace, below expectations and the smallest rise since the three months to November 2017. Similarly, excluding bonuses, the rate dipped from 2.9 percent to 2.8 percent, also just shy of the market consensus. As a result, real regular pay growth was unchanged at just 0.4 percent.

Consequently, today's labour market update does little to bolster the case of the BoE MPC's hawks. Despite some anecdotal evidence to the contrary, wages remain subdued and without a boost to inflation here, justifying a monetary tightening as soon as August's MPC meeting is likely to prove problematic.

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.