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Five reasons for fading UK labour market strength

Posted on Tuesday, March 19, 2019 at 03:59PM by Registered CommenterSimon Ward | Comments3 Comments

1. Employment is a lagging indicator – strength in late 2018 may reflect a pick-up in quarterly GDP expansion to 0.6% in the third quarter. Growth fell back to 0.2% last quarter.

2. Business surveys are signalling slower hiring – see first chart, which shows an average of employment expectations across the CBI / EU Commission monthly services, industry and retailing surveys.

3. As well as building inventories of physical goods, firms may be “stockpiling” labour to protect against an early end to freedom of movement in the event of a no deal Brexit. This could partly explain continued dismal productivity performance.

4. Solid increases in employment and average earnings have pushed annual growth of aggregate wages up to 5.1%, well above nominal GDP expansion of 3.0% – second chart. The excess implies a further squeeze on profits, with negative feedback to future investment and hiring.

5. Weak corporate real narrow money growth corroborates a squeeze on finances and is a negative signal for future employment – third chart.

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Reader Comments (3)

Totally concur with this - anecdotal evidence speaking to a friend in recruitment (within Facilities management) says no one is hiring.
Thank you for the regular updates

March 20, 2019 | Unregistered CommenterEmma Wilkinson

Thanks for the post Simon, and for prior reponses to questions.
How are you defining Employees here?
LFS In Employment Aged 16+ doesn't quite give that shape YoY?
Also, the CBI employment survey seems to be quarterly?

March 22, 2019 | Unregistered CommenterSeb Jory

Thanks Emma. Seb - I'm using LFS series MGRN, which excludes self-employment. In addition to its quarterly surveys, the CBI compiles monthly data for the EU Commission.

March 26, 2019 | Registered CommenterSimon Ward

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