| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Claimant Count - M/M | 10,000 | 50,400 | 8,900 | 8,400 |
| Claimant Count Unemployment Rate | 4.3% | 4.1% | ||
| ILO Unemployment Rate | 4.3% | 4.4% | 4.3% | |
| Average Earnings - Y/Y | 5.7% | 5.9% | 5.7% | 5.9% |
Highlights
In line with the previous report, today's update paints a mixed picture of the labour market with further signs of cooling economic activity but stubbornly high wage growth.
Claimant count unemployment rose a surprisingly steep 50,400 on the month in May following a marginally smaller revised 8,400 increase in April. This was its largest advance since the upswing began in September last year and sharp enough to boost the jobless rate from 4.1 percent to 4.3 percent, its highest reading since February 2022.
Meantime, the ILO data for February-April showed the number of people out of work climbing a sizeable 138,000. This lifted the jobless rate to 4.4 percent, a tick above the market consensus and matching its highest outturn since the Covid-impacted third quarter of 2021. Employment was again weak, falling 139,000 over the same period to 32.967 million, its fourth consecutive decline and its lowest level since August-October 2022. As a result, the employment rate slipped from 74.5 percent to 74.3 percent to equal its weakest mark since the first quarter of 2021.
More up to date, the payroll data also showed a 3,132 drop in May after a shallower revised 36,321 fall in April. This was its third decrease in the last four months, albeit the smallest of the sequence. In addition, looking forward, vacancies in the three months to May dropped 2,000 to 904,000, their lowest mark since the second quarter of 2021.
However, wage developments were again surprisingly robust. At a 5.9 percent rate, average annual growth in the three months to April was unchanged from its upwardly revised rate in the first quarter and so matched a 5-month high. Regular pay proved just as sticky, holding stable at an even stronger 6.0 percent.
Today's update further reduces the likelihood of a cut in Bank Rate at next week's BoE MPC meeting. The labour market still looks to be cooling but wage growth will probably need to slow a good deal more for most members to be convinced that the 2 percent inflation target can be met on a sustainable basis. Moreover, with the UK's RPI (12) and RPI-P (13) back above zero, economic activity in general is now running slightly ahead of market forecasts.
Claimant count unemployment rose a surprisingly steep 50,400 on the month in May following a marginally smaller revised 8,400 increase in April. This was its largest advance since the upswing began in September last year and sharp enough to boost the jobless rate from 4.1 percent to 4.3 percent, its highest reading since February 2022.
Meantime, the ILO data for February-April showed the number of people out of work climbing a sizeable 138,000. This lifted the jobless rate to 4.4 percent, a tick above the market consensus and matching its highest outturn since the Covid-impacted third quarter of 2021. Employment was again weak, falling 139,000 over the same period to 32.967 million, its fourth consecutive decline and its lowest level since August-October 2022. As a result, the employment rate slipped from 74.5 percent to 74.3 percent to equal its weakest mark since the first quarter of 2021.
More up to date, the payroll data also showed a 3,132 drop in May after a shallower revised 36,321 fall in April. This was its third decrease in the last four months, albeit the smallest of the sequence. In addition, looking forward, vacancies in the three months to May dropped 2,000 to 904,000, their lowest mark since the second quarter of 2021.
However, wage developments were again surprisingly robust. At a 5.9 percent rate, average annual growth in the three months to April was unchanged from its upwardly revised rate in the first quarter and so matched a 5-month high. Regular pay proved just as sticky, holding stable at an even stronger 6.0 percent.
Today's update further reduces the likelihood of a cut in Bank Rate at next week's BoE MPC meeting. The labour market still looks to be cooling but wage growth will probably need to slow a good deal more for most members to be convinced that the 2 percent inflation target can be met on a sustainable basis. Moreover, with the UK's RPI (12) and RPI-P (13) back above zero, economic activity in general is now running slightly ahead of market forecasts.
Market Consensus Before Announcement
Average earnings growth for the three months to April is seen flat at 5.7 percent and the ILO unemployment rate is similarly expected to hold steady at 4.3 percent. The claimant count is forecast up 10,000 in May versus a gain of 8,900 in April.
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.
