What’s going on in the labour market?

Every quarter, the Office for National Statistics shares estimates as to what’s going on in the labour market. And, when it comes to levels of employment, the news is all good. In fact, the rate of employment sits at 74.8% - joint highest since record began back in 1971. And the unemployment rate was at 4.6%, down 5% from the same time last year and – once again – the joint lowest since they opened their records.

Other stats of interest, were that the figure for unemployed people is at 1.53 million, 50,000 lower than the previous quarter (November ’16 to January ’17). That’s also 145,000 less than a year earlier. And for those people who were economically inactive, the inactivity rate was 21.5% down from 21.8% for a year earlier – also the joint lowest since records began.

The only slight blot on the economic landscape is that whilst the number of us working is on the up, our average weekly earnings in real terms are not. What do we mean by that? Well, if average weekly earnings for employees in Great Britain in nominal earnings are those that are not adjusted for price inflation, our real term weekly earnings are adjusted for price inflation. And to that end, we’re not as well off. In fact, real term average weekly earnings fell by 0.4% including bonuses and fell by 0.6% excluding bonuses c.f a year earlier. It’s a further indication that our pay squeeze has intensified. And with the political landscape as uncertain as it is, it will be interesting to see what the next quarter’s figures will show us.


Thursday, 15 June 2017

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Mariano Mamertino, EMEA economist, Indeed Date: Jun 19, 2017

Each successive fall in unemployment is looking like an ever more hollow victory. For several months - and throughout the election campaign - the greatest concern over the labour market has shifted from those who are out of work to those who are in work, and how their living standards are being steadily squeezed. The reason is pay rises are no longer just being outpaced, but left behind, by accelerating inflation. Consumer prices have risen by 2.9% in the past 12 months, yet by April average wages were creeping up at just 1.7% a year. That gaping mismatch will inevitably morph from a source of pain for workers into a threat to the wider economy. Real wages aren’t just falling - they’re stuck in reverse - and this risks undermining Britain’s increasingly fragile economic growth. Nevertheless there is hope. The rate of job creation continues to impress and inactivity rates are falling. With employment rates at their highest level since records began, employers in many sectors are competing hard to secure the best talent. The latest data from Indeed reveals that nearly a quarter of civil engineering jobs, 22% of legal roles and 18% of healthcare vacancies are taking more than two months to fill. As the number of such ‘hard to fill’ roles increases, employers will tend to increase the salaries they offer new recruits. This tightening of the labour market will nudge up average wages in some areas but there is a long way to go to ease the pain of Britain’s worsening squeeze on living standards.

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What’s going on in the labour market?