United Kingdom: Labor market shows resilience in September-November period
January 24, 2018
Jobless claims rose by 8,600 in December according to the Office for National Statistics (ONS), compared to a revised 12,000 uptick in November (previously reported: +6,000) and overshooting analysts’ expectations.
The unemployment rate—derived from a different survey—remained at a multi-decade low of 4.3% in the September-November period (the latest period for which data is available), matching market expectations. The economic inactivity rate, at 21.2%, was down from the same period in the prior year and was the joint-lowest since 1971. Encouragingly, employment rose markedly in September-November compared to June-August, defying expectations of a net fall in employment and belying fears of a loss of momentum in the labor market, following weak figures in the previous month. The increase was driven by more full-time jobs.
However, despite stellar job creation and low unemployment, total pay fell by 0.2% in September-November, matching the prior month’s figure. Elevated inflation continues to eat into consumers’ purchasing power. Poor productivity growth, business uncertainty and the changing composition of the workforce could also be playing a role in dampening wages.
UK Unemployment Forecast
Our panelists expected the unemployment rate to drift up slightly from its current level going forward, averaging 4.5% in 2018 and 4.6% in 2019. Real wages should recover gradually as inflation recedes, although only a mild improvement is forecast for this year.
Author: Oliver Reynolds, Economist