| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Claimant Count - M/M | 5,000 | -13,600 | 46,700 | 23,400 |
| Claimant Count Unemployment Rate | 3.9% | 4.0% | 3.9% | |
| ILO Unemployment Rate | 4.0% | 3.8% | 3.9% | |
| Average Earnings - Y/Y | 6.0% | 6.5% | 5.8% | 6.1% |
Highlights
The April/May report was another mixed bag but its firm inflation content will not sit well with the BoE.
Claimant count unemployment surprisingly fell 13,600 to 1.536 million in May. This followed a shallower revised 23,400 increase in April and was the first decline since February. The jobless rate was unchanged at 3.9 percent having been revised down to that level at the start of the quarter and remains historically low.
Meanwhile, the ILO data also showed unemployment rising a further 52,000 to 1.305 million in the three months to April. However, the rate still dipped from 3.9 percent to 3.8 percent, a couple of ticks below the market consensus. Moreover, employment was again very robust, posting a hefty 250,000 jump to 33.089 million, a record high. This raised the employment rate to 76.0 percent, up from 75.8 percent in the three months to January. In addition, while only provisional, the more timely estimate of payrolled employees showed a monthly 23,000 increase in May. That said, vacancies decreased again. A 79,000 drop in the three months to May extended the unbroken trend decline that began back in the May-July 2022 period. However, they remain some 225,000 above their pre-pandemic peak.
Finally, but of key importance to the BoE, overall wage growth was much stronger than expected. A 6.5 percent yearly rate for the three months to April was well above the market consensus and followed an upwardly revised 6.1 percent rate in the first quarter. Regular earnings were even stronger, accelerating from 6.8 percent to 7.2 percent, a new record high outside of the Covid period.
In sum, today's update is again mixed but the combination of robust employment gains and high and accelerating earnings growth should be enough to ensure another 25 basis point hike by the BoE MPC next week. Indeed, the report puts the UK's ECDI at 36 and the ECDI-P at 40. Both readings are far enough in positive surprise territory to signal that economic activity in general is running well ahead of what the forecasters predicted.
Claimant count unemployment surprisingly fell 13,600 to 1.536 million in May. This followed a shallower revised 23,400 increase in April and was the first decline since February. The jobless rate was unchanged at 3.9 percent having been revised down to that level at the start of the quarter and remains historically low.
Meanwhile, the ILO data also showed unemployment rising a further 52,000 to 1.305 million in the three months to April. However, the rate still dipped from 3.9 percent to 3.8 percent, a couple of ticks below the market consensus. Moreover, employment was again very robust, posting a hefty 250,000 jump to 33.089 million, a record high. This raised the employment rate to 76.0 percent, up from 75.8 percent in the three months to January. In addition, while only provisional, the more timely estimate of payrolled employees showed a monthly 23,000 increase in May. That said, vacancies decreased again. A 79,000 drop in the three months to May extended the unbroken trend decline that began back in the May-July 2022 period. However, they remain some 225,000 above their pre-pandemic peak.
Finally, but of key importance to the BoE, overall wage growth was much stronger than expected. A 6.5 percent yearly rate for the three months to April was well above the market consensus and followed an upwardly revised 6.1 percent rate in the first quarter. Regular earnings were even stronger, accelerating from 6.8 percent to 7.2 percent, a new record high outside of the Covid period.
In sum, today's update is again mixed but the combination of robust employment gains and high and accelerating earnings growth should be enough to ensure another 25 basis point hike by the BoE MPC next week. Indeed, the report puts the UK's ECDI at 36 and the ECDI-P at 40. Both readings are far enough in positive surprise territory to signal that economic activity in general is running well ahead of what the forecasters predicted.
Market Consensus Before Announcement
The ILO unemployment rate for the three months to April is expected to rise to 4.0 percent versus 3.9 percent in the prior report. Average earnings growth for the three months to April is seen climbing to 6.0 percent from 5.8 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.
