| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Claimant Count - M/M | -15,000 | 25,700 | -13,600 | -22,500 |
| Claimant Count Unemployment Rate | 4.0% | 3.9% | 3.9% | |
| ILO Unemployment Rate | 3.8% | 4.0% | 3.8% | |
| Average Earnings - Y/Y | 6.7% | 6.9% | 6.5% | 6.7% |
Highlights
The May/June report shows some easing in overall labour market conditions but not to the extent needed to accommodate any fall in wage pressures. As such, it will not sit well with the BoE.
Claimant count unemployment surprisingly rose 25,700 to 1.552 million in June, more than unwinding a steeper revised 22,500 drop in May. This was the largest increase since March and lifted the jobless rate by a tick to 4.0 percent from an upwardly amended 3.9 percent in mid-quarter. However, the rate remains historically low.
Meanwhile, the ILO data also showed unemployment rising a further 77,000 to 1.370 million in the three months to May. This was its sharpest increase since the market began turning in the third quarter of last year and large enough to boost the jobless rate from 3.8 percent in December-February to 4.0 percent. This was above the market consensus and matched its highest mark since September-November 2021. Even so, employment growth remained robust, with jobs climbing a solid 102,000 to 33.053 million, a new record high. The employment rate (76.0 percent) was also up 0.2 percentage points from the previous quarter.
That said, the more timely estimate of payrolled employees showed a 9,261 drop in June, its first decline since February 2021. Although only provisional, this could point to a moderation in the labour demand growth in the pipeline. This would certainly be consistent with vacancies which fell again, this time by 85,000 to 1.034 million in the second quarter. The latest drop was the steepest since the unbroken trend decline began back in the May-July 2022 period.
Finally, and of key importance to the BoE, overall wage growth was again stronger than expected. A 6.9 percent yearly rate for the three months to May was 0.2 percentage points above the market consensus and followed an upwardly revised 6.7 percent rate in the three months to April. Regular earnings were even stronger, albeit stable, at 7.3 percent, matching the record high seen outside of the Covid period.
In sum, today's update shows signs that the labour market is beginning to respond to what is a stagnating, if not contracting, real economy. However, it remains tight enough to sustain wage growth at far too high a level to make the 2 percent CPI target attainable. Accordingly, Bank Rate still looks very likely to be hiked again next month. Today's report puts the UK's ECDI at 22 and the ECDI-P at 9, both readings in positive surprise territory but overall outperformance being largely attributable to unexpectedly high prices.
Claimant count unemployment surprisingly rose 25,700 to 1.552 million in June, more than unwinding a steeper revised 22,500 drop in May. This was the largest increase since March and lifted the jobless rate by a tick to 4.0 percent from an upwardly amended 3.9 percent in mid-quarter. However, the rate remains historically low.
Meanwhile, the ILO data also showed unemployment rising a further 77,000 to 1.370 million in the three months to May. This was its sharpest increase since the market began turning in the third quarter of last year and large enough to boost the jobless rate from 3.8 percent in December-February to 4.0 percent. This was above the market consensus and matched its highest mark since September-November 2021. Even so, employment growth remained robust, with jobs climbing a solid 102,000 to 33.053 million, a new record high. The employment rate (76.0 percent) was also up 0.2 percentage points from the previous quarter.
That said, the more timely estimate of payrolled employees showed a 9,261 drop in June, its first decline since February 2021. Although only provisional, this could point to a moderation in the labour demand growth in the pipeline. This would certainly be consistent with vacancies which fell again, this time by 85,000 to 1.034 million in the second quarter. The latest drop was the steepest since the unbroken trend decline began back in the May-July 2022 period.
Finally, and of key importance to the BoE, overall wage growth was again stronger than expected. A 6.9 percent yearly rate for the three months to May was 0.2 percentage points above the market consensus and followed an upwardly revised 6.7 percent rate in the three months to April. Regular earnings were even stronger, albeit stable, at 7.3 percent, matching the record high seen outside of the Covid period.
In sum, today's update shows signs that the labour market is beginning to respond to what is a stagnating, if not contracting, real economy. However, it remains tight enough to sustain wage growth at far too high a level to make the 2 percent CPI target attainable. Accordingly, Bank Rate still looks very likely to be hiked again next month. Today's report puts the UK's ECDI at 22 and the ECDI-P at 9, both readings in positive surprise territory but overall outperformance being largely attributable to unexpectedly high prices.
Market Consensus Before Announcement
The ILO unemployment rate for the three months to May is expected to hold unchanged at 3.8 percent. Average earnings growth for the three months to May is seen rising to 6.7 from 6.5 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.
