UK labour market stall probably ending
Simon Ward
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UK labour market tightening stalled in early 2015: employment and aggregate hours worked fell by 0.2% between the first and second quarters, while the unemployment rate edged up from 5.5% to 5.6%.
The issue for the MPC is whether this setback is temporary, reflecting slower first-quarter GDP expansion and pre-election hiring caution, or indicates a weaker growth trend and / or stepped-up productivity performance.
Vacancies, a leading indicator of employment, provide tentative support for the former hypothesis. The official vacancies series (a three-month moving average) declined between February and May but recovered in June – see first chart. Similarly, claimant count unemployment – which now includes those transitioned to universal credit – fell by 4,900 in July, the most since April.
Annual weekly earnings growth (three-month average) declined from 3.2% in May to 2.4% in June, reflecting a slowdown in volatile bonuses. The ex bonus measure was stable at 2.8%, with the private sector component at 3.3%. With average weekly hours down slightly from a year ago, hourly ex bonus earnings growth rose to 3.1%, a four-year high – second chart.
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