UK vacancies signalling slowing contraction
Simon Ward
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Job vacancies are a coincident indicator of the economy and a leading indicator of employment and (inversely) unemployment. A 7.7% fall in the outstanding stock in the second quarter was the smallest since a 5.5% decline in the second quarter of 2008, supporting other evidence that GDP contraction slowed sharply last quarter.
The first chart updates a comparison with the last three recessions. The current decline continues to resemble 1989-91 rather than the deeper falls of 1979-81 and 1974-76 (when union power may have constrained layoffs, forcing firms to curb new hiring by more to achieve desired employment levels). Vacancies bottomed 18-24 months after the peak in all three recessions, suggesting that the current fall will end between August 2009 and February 2010.
Other evidence hints at an early trough. For example, the Markit Report on Jobs permanent placements index peaked seven months before vacancies and has been picking up since December, implying a possible vacancies trough in July – second chart. This would be consistent with a stabilisation or small rise in GDP in the third quarter.
(Note: the vacancies statistics for the earlier recessions refer to openings registered at Job Centres. This series was discontinued in 2001 and replaced by a survey of employers.)
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