| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Claimant Count - M/M | -15,000 | 29,000 | 25,700 | 16,200 |
| Claimant Count Unemployment Rate | 4.0% | 4.0% | 3.9% | |
| ILO Unemployment Rate | 4.0% | 4.2% | 4.0% | |
| Average Earnings - Y/Y | 7.2% | 8.2% | 6.9% | 7.2% |
Highlights
The June/July report was a very mixed bag with unemployment climbing surprisingly sharply alongside an even more marked jump in wages.
Claimant count unemployment rose fully 29,000 on the month in July versus expectations for a decline. This followed a downwardly revised 16,200 increase in June and lifted the unemployment rate from 3.9 percent to (a still historically low) 4.0 percent.
Meanwhile, the ILO data also showed unemployment rising a further 109,000 to 1.439 million in the second quarter. This was the largest increase since the fourth quarter of 2020 and means that, on a 3-monthly basis, joblessness has increased every month since August-October 2022. Indeed, the latest rise was steep enough to lift the jobless rate to 4.2 percent, some 0.2 percentage points above the market consensus. Moreover, over the same period, employment contracted 66,000, its first decline since the third quarter of 2022 and trimming the employment rate by 0.1 percentage point versus the first quarter to 75.7 percent. However, complicating the picture, the experimental July payroll data showed a provisional monthly 97,000 increase, the sharpest gain since February last year.
Still, looking ahead, vacancies were again weak, posting a 66,000 decline in the three months to July. While at 1.020 million, the latest level remains historically high, the latest drop extended the unbroken downtrend that began back in May-July 2022.
Finally, and of key importance to the BoE, overall wage growth easily beat market expectations. At fully 8.2 percent, the overall headline rate in the second quarter was a full percentage point above the market consensus and some 2.1 percentage points higher than in the first quarter. Making matters worse, regular earnings also climbed to 7.8 percent, a new record high.
In sum, today's update leaves the BoE in a real dilemma. In general, the labour market appears to be cooling but the rapid acceleration in wage growth warns that underlying inflation pressures remain ominously strong. As such, another hike in Bank Rate next month remains likely unless tomorrow's CPI report is especially weak. Today's report puts the UK's ECDI at a solid 47 and the ECDI-P at an even higher 55. Both readings show that economic activity in general is easily outpacing market expectations.
Claimant count unemployment rose fully 29,000 on the month in July versus expectations for a decline. This followed a downwardly revised 16,200 increase in June and lifted the unemployment rate from 3.9 percent to (a still historically low) 4.0 percent.
Meanwhile, the ILO data also showed unemployment rising a further 109,000 to 1.439 million in the second quarter. This was the largest increase since the fourth quarter of 2020 and means that, on a 3-monthly basis, joblessness has increased every month since August-October 2022. Indeed, the latest rise was steep enough to lift the jobless rate to 4.2 percent, some 0.2 percentage points above the market consensus. Moreover, over the same period, employment contracted 66,000, its first decline since the third quarter of 2022 and trimming the employment rate by 0.1 percentage point versus the first quarter to 75.7 percent. However, complicating the picture, the experimental July payroll data showed a provisional monthly 97,000 increase, the sharpest gain since February last year.
Still, looking ahead, vacancies were again weak, posting a 66,000 decline in the three months to July. While at 1.020 million, the latest level remains historically high, the latest drop extended the unbroken downtrend that began back in May-July 2022.
Finally, and of key importance to the BoE, overall wage growth easily beat market expectations. At fully 8.2 percent, the overall headline rate in the second quarter was a full percentage point above the market consensus and some 2.1 percentage points higher than in the first quarter. Making matters worse, regular earnings also climbed to 7.8 percent, a new record high.
In sum, today's update leaves the BoE in a real dilemma. In general, the labour market appears to be cooling but the rapid acceleration in wage growth warns that underlying inflation pressures remain ominously strong. As such, another hike in Bank Rate next month remains likely unless tomorrow's CPI report is especially weak. Today's report puts the UK's ECDI at a solid 47 and the ECDI-P at an even higher 55. Both readings show that economic activity in general is easily outpacing market expectations.
Market Consensus Before Announcement
The ILO unemployment rate for the second quarter is expected to hold steady at 4.0 percent, while average earnings growth for the same period is seen climbing to 7.2 percent from 6.9 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.
