| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Claimant Count - M/M | 18,000 | -12,900 | 19,700 | -3,200 |
| Claimant Count Unemployment Rate | 3.9% | 4.0% | 3.9% | |
| ILO Unemployment Rate | 3.7% | 3.7% | 3.7% | |
| Average Earnings - Y/Y | 6.2% | 5.9% | 6.4% | 6.5% |
Highlights
The December/January report shows that the labour market is still too tight to accommodate any easing in underlying wage growth. This will not sit well with the BoE.
Following a significantly revised 3,200 fall in December, claimant count unemployment declined a further 12,900 at the start of the year. This was nowhere near the market consensus, its steepest drop since last July and reduced the number of people out of work to 1.539 million, matching October's recent low. The jobless rate was unchanged but at December's downwardly revised lowly 3.9 percent.
Meanwhile, the ILO data showed unemployment climbing 45,000 in the fourth quarter, to 1.270 million. This put the rate at 3.7 percent, up a tick on the quarter but still historically very low and in line with the market consensus. Employment rose 53,000 over the same period, but the gain here was dominated by part-time workers. Even so, the more timely experimental payrolls survey found a hefty 102,000 monthly increase to 30.0 million in January and, on this measure, employment has still climbed every month since February 2021. That said, the trend in vacancies remains firmly down. At 1.134 million in the three months to January, the latest reading was down 76,000 versus the previous period, extending the unbroken run of falls that began in the three months to July. However, they remain well above their pre-pandemic peak.
Finally, overall wage growth decelerated surprisingly sharply in the fourth quarter. The headline annual rate dropped to 5.9 percent from 6.5 percent in the three months to November and 6.0 percent in the third quarter. This was its lowest print since the three months to July. However, the slowdown was essentially due to weaker bonus payments and excluding these, regular earnings continued to accelerate. Indeed, at 6.7 percent, they hit a new record high outside of the Covid period
In sum, today's update offers further tentative signs that the labour market is loosening a little. However, it remains very tight and clearly tight enough to support an inflationary rate of wage growth. To this end, another round of BoE tightening next month looks very likely although a good inflation report tomorrow could mean a 25 basis point hike, rather than another 50 basis points. To this end, both the UK's ECDI (minus 14) and ECDI-P (minus 21) indicate that overall economic activity is performing rather weaker than expected.
Following a significantly revised 3,200 fall in December, claimant count unemployment declined a further 12,900 at the start of the year. This was nowhere near the market consensus, its steepest drop since last July and reduced the number of people out of work to 1.539 million, matching October's recent low. The jobless rate was unchanged but at December's downwardly revised lowly 3.9 percent.
Meanwhile, the ILO data showed unemployment climbing 45,000 in the fourth quarter, to 1.270 million. This put the rate at 3.7 percent, up a tick on the quarter but still historically very low and in line with the market consensus. Employment rose 53,000 over the same period, but the gain here was dominated by part-time workers. Even so, the more timely experimental payrolls survey found a hefty 102,000 monthly increase to 30.0 million in January and, on this measure, employment has still climbed every month since February 2021. That said, the trend in vacancies remains firmly down. At 1.134 million in the three months to January, the latest reading was down 76,000 versus the previous period, extending the unbroken run of falls that began in the three months to July. However, they remain well above their pre-pandemic peak.
Finally, overall wage growth decelerated surprisingly sharply in the fourth quarter. The headline annual rate dropped to 5.9 percent from 6.5 percent in the three months to November and 6.0 percent in the third quarter. This was its lowest print since the three months to July. However, the slowdown was essentially due to weaker bonus payments and excluding these, regular earnings continued to accelerate. Indeed, at 6.7 percent, they hit a new record high outside of the Covid period
In sum, today's update offers further tentative signs that the labour market is loosening a little. However, it remains very tight and clearly tight enough to support an inflationary rate of wage growth. To this end, another round of BoE tightening next month looks very likely although a good inflation report tomorrow could mean a 25 basis point hike, rather than another 50 basis points. To this end, both the UK's ECDI (minus 14) and ECDI-P (minus 21) indicate that overall economic activity is performing rather weaker than expected.
Market Consensus Before Announcement
The ILO unemployment rate for the three months to December is expected to hold steady at the 3.7 percent of the prior two reports. Headline average earnings growth is expected to ease from 6.4 percent to 6.2 percent.
Definition
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 more reliable but 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.
Description
The labour market survey gives 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.
The survey also provides information 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 is a reasonable bet that interest rates will have to rise and bond and stock prices will fall. In contrast, when jobs growth is slow or negative, then interest rates are more likely to decline - boosting bond and stock prices in the process.
The survey also provides information 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 is a reasonable bet that interest rates will have to rise and bond and stock prices will fall. In contrast, when jobs growth is slow or negative, then interest rates are more likely to decline - boosting bond and stock prices in the process.
