The May 2019 Labour Market Report released by the Office for National Statistics which covers the first quarter of 2019. The unemployment rate dropped to 3.8%, its lowest level since 1974. In that period, 99,000 jobs were added to the UK economy, which was lower than some analysts had projected. Nominal wages rose by 3.3% over the year.

The Numbers

The UK employment rate was estimated at 76.1%, which is higher than the previous year (75.6%) and tied for the highest figure on record.

Estimates for the first quarter of 2019 show 32.70 million employed people who are 16-years-old and over, which is 354,000 more than for a year earlier. This increase is due entirely to an increase in full-time workers. Part-time workers decreased by 18,000 on the year to reach 8.59 million.

The UK unemployment rate was estimated at 3.8%; it has not been lower since October to December 1974.

The UK economic inactivity rate was estimated at 20.8%, lower than a year earlier (21.1%) and close to a record low. Economic inactivity measures people without a job but who are not classed as unemployed because they have not been actively seeking work within the last four weeks and/or they are unable to start work within the next two weeks.

For February to April 2019, there were an estimated 846,000 vacancies in the UK, 28,000 more than a year earlier. Job vacancies are reported on a different schedule than most of the other labour market figures.

Solid Job Numbers, but Lower Than Expected

The addition of nearly 100,000 jobs to the economy is good news by any standard. Yet many economists were expecting even greater increases, and there was speculation about the slowing rate of growth for both jobs and wages. Uncertainty over Brexit is still lurking in the background, as Reuters reports:

“The jobs boom may well reflect how employers have opted to take on workers – who can be laid off quickly during a downturn – rather than commit to longer-term investments while they wait for uncertainty over the conditions of Britain’s departure from the European Union to lift.”

Trouble Ahead?

The idea that employers are choosing to hire expendable workers rather than make long-term capital investments does not suggest confidence in the nation’s economic outlook. Some economists quoted in the Financial Times found some of the data from the May report to be a cause for concern:

“’Britain’s job market continues to defy wider economic uncertainty,’ said Stephen Clarke, senior economic analyst at the Resolution Foundation…

The number of jobs added in the first three months to March was below expectations and lower than the number added in the three months to February. While the number of self-employed increased, the number of full-time employees dropped by 55,000 compared with the previous quarter.

‘Some tentative early warning signs suggest that the jobs market is entering a turbulent period,’ warned James Smith, an economist at ING.

Surprising Growth in the Number of EU Workers

The first quarter of 2019 may well be remembered as a time when Brexit was the dominant topic in every part of the country. Workers for EU countries residing in the UK faced an uncertain future as the original Brexit date loomed. Last year, the ONS reported significant numbers of EU workers leaving the UK in a trend that was nicknamed “Brexodus.”

Yet during this same time, the number of EU nationals working in the UK reached a record high. Nearly 2.4 million citizens of other EU countries now work in the UK, an increase of more than 100,000 compared to the final three months of 2018.

For employers, unexpected shifts such as the reversal of Brexodus underscore the need for expertise in attracting and retaining talent in the uncertain months ahead.

Statistics Canada reported that the nation’s unemployment fell to 5.7% and that 107,000 jobs were gained after shedding jobs in March. This is the biggest one month increase with records going back to 1976. The record job growth beat market expectations of an addition of just 12,000 jobs or less. Canada added 426,400 jobs over the past 12 months, up 2.3%, which is the largest one-year increase since 2007 before the Great Recession. In the last two years, the economy has added 700,000 jobs.

The Numbers

107,000: The economy added 107,000 jobs in April.

5.7%: The unemployment rate fell to 5.7%.

2.1%: Weekly wages increased 2.1% over the last year.

The Good

Employment increased in Ontario, Quebec, Alberta and Prince Edward Island. Several important sectors posted positive job numbers including wholesale and retail trade; construction; information, culture and recreation; public administration; and agriculture. The employment situation improved for some key demographic groups as well. There were job increases for youth aged 15 to 24, people aged 55 and older and women in the core working ages of 25 to 54.

In a hopeful sign for the economy, youth employment accounted for much of the gains in jobs in April, as unemployment for those aged 15 to 24 hit its lowest rate in 43 years. The Labour Force Survey reported that youth unemployment rate fell to 10.3% with jobs for Canada’s younger workers growing by 89,000 over the past year. The rate has not been that low since Statistics Canada starting using its current statistical criteria in 1976.

While the annual wage growth numbers are still not strong compared to other advanced economies, there are some signs of progress. While annual weekly wages decreased from last month, annual hourly wage gains increased to 2.5% in April, the fastest annual gain since September and up from 2.4% in March. Pay increases for permanent employees jumped to 2.6%, the largest increase since August.

The jobs report was welcomed by some analysts as a sign that employers are demonstrating confidence in the Canadian economy:

“’Nearly every indicator of quality came in strong this month: The best-ever gain came with solid full-time job growth, all in employees — rather than self-employed — more Canadians were drawn into labour markets and wages were up,’ said Brian DePratto, senior economist for TD Economics, in a written statement about the results.

‘Chalk this one up as a solid message that employers still have faith in the Canadian economy.’”

The Bad

While the report contained good news for much of Canada’s workforce, not every sector, province or demographic group fared well. Employment decreased in professional, scientific and technical services and in New Brunswick. The employment gains for the remaining provinces were negligible compared to Ontario, Quebec, Alberta and Prince Edward Island.

Contrasting with the vote of confidence that some have interpreted from the April report, some leading economists have recently expressed modest expectations for Canada’s economic growth this year:

“Deloitte’s latest economic advisory report projects a year of slower economic growth, a weak Canadian dollar, and a vulnerable economy. Though the dreaded “R-word” (recession) remains a possibility, the consultancy projects modest growth of 1.3% in 2019 and 1.5% in 2020 for Canada.

After posting strong growth of 3% in 2017, the Canadian economy slowed to 1.8% in 2018, and has little momentum heading into this year. Factors such as a drop in residential investment, weaker consumer spending, and a decelerating US economy are projected to moderate growth to 1.3% in 2019, according to Deloitte Canada.

Though the firm says a recession isn’t the most likely outcome, slowed economic growth does make Canada more vulnerable to risks like protectionism, Brexit, and low global interest rates.”

The Unknown

The validity of the data in the April report and the conclusions drawn by many economists was questioned on the day the report was released in Bloomberg:

“A loss of 7,200 jobs in March, and then a gain of 106,500 jobs in April. For David Rosenberg, Canada’s latest employment data just doesn’t add up.

Statistics Canada said Friday that Canadian employment increased by 106,500 positions in April, the biggest one-month increase in data going back to 1976. The country’s jobless rate fell to 5.7%, compared to 5.85 in March.

But Rosenberg, chief economist and strategist at Gluskin Sheff + Associates, says the country’s latest jobs numbers are hard to believe, given what’s happening in the Canadian economy.

‘Did you really believe that the Canadian labour market is so volatile that we could have a [7,200] decline in the labour force in one month, followed by a 100,000-increase in the next month? Is our labour market more volatile than the stock market is? It’s hard to believe,’ Rosenberg said in an interview with BNN Bloomberg Friday.

‘Somehow we’re creating record jobs and in the same survey in the United States, they’re losing jobs in a significant way. So what I’m trying to say is, calm down a little bit. There’s no way that the Canadian economy is nearly as strong as this number would lead you to suggest.’

Rosenberg took issue with a few details in StatsCan’s labour force survey, pointing to how most of the job gains were concentrated among youth, and in sectors such as construction and retail.

‘I thought we were battling a housing bubble in this country,’ Rosenberg said. ‘Meanwhile, we know that consumers are going on the debt treadmill and doing more to repair their balance sheets than head out to the shopping malls.’

Rosenberg, who has been known for his bearish views on Bay Street, questioned any cheering of the April labour figures.

‘It’s like you’re a teacher in high school and your dumbest student just handed in an ‘A’ report and you just don’t really know what to do with it,’ Rosenberg said. ‘I don’t give it an ‘A’ by the way.’”

The Labor Department released its April jobs report which shows that U.S. employers added 263,000 jobs in March, beating analyst expectations. The unemployment rate fell to 3.6 percent last month. Year-over-year wage growth remained at 3.2 percent, which is well ahead of the rate of inflation. U.S. employers have added to payrolls for 103 straight months, extending the longest continuous jobs expansion on record.

The Numbers

263,000: The economy added 263,000 jobs in April.

3.6%: The unemployment rate fell to 3.8%.

3.2%: Wages increased at a rate of 3.2% growth over the last year.

The Good

The U.S. economy demonstrated its resilience with the strong April Jobs report. After shedding jobs in March, manufacturing had a modest rebound adding 4,000 positions while other key economic sectors had impressive gains. Leisure and hospitality added 34,000 positions, education and health services increased by 62,000 jobs and business and professional services jobs grew by 76,000.

The jobs report was generally greeted with enthusiasm by analysts who tempered their responses with caveats about the meaning of the data as in this reporting by Bloomberg.

“It’s clearly telling you this economy is still chugging along very nicely,” Torsten Slok, chief economist at Deutsche Bank Securities, said on Bloomberg Television. “It is inflationary in the sense that wages did go up but they didn’t go up as much as we had expected. Goldilocks is the best description of this,” Slok said.

The surprising overall robustness – which didn’t reflect any surge in temporary hires for the 2020 Census, as some analysts had flagged – follows months of broad labor market strength. While the expansion is poised to become the nation’s longest on record at midyear, economists expect a deceleration this year even after a strong first quarter.

The New York Times noted that the elements of the strong job market have defied conventional economic expectations and could assuage fears of an economic downturn.

“Not that long ago, the overwhelming consensus among economists would have been that you couldn’t have a 3.6% unemployment rate without also seeing the rate of job creation slowing (where are new workers going to come from with so few out of work, after all?) and having an inflation surge (a worker shortage should mean employers bidding up wages, right?).

And yet that is what has happened, with the April employment numbers putting an exclamation point on the trend. The jobless rate receded to its lowest level in five decades. Employers also added 263,000 jobs; the job creation estimates of previous months were revised up; and average hourly earnings continued to rise at a steady rate — up 3.2 percent over the last year…

In particular, it now appears that recession fears that emerged at the end of 2018 were misguided — especially once the Fed backed off its campaign of rate increases at the start of 2019.”

The Bad

The participation rate, those who are working or want to work, decreased in April. The broadest measure of unemployment, which includes part-time workers who want to work full-time has remained virtually unchanged since February. Despite a strong job market and rising wages, some Americans are opting out of the workforce and those who want to more fully participate have not been able to do so.

The April report also showed that the robust job market has not impacted two categories of potential talent over the last year. In April, 1.4 million persons were marginally attached to the labor force, little different from a year earlier. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 454,000 discouraged workers in April, basically unchanged from a year earlier. Discouraged workers are those not currently looking for work because they believe no jobs are available for them.

The Unknown

Jobs in the retail sector decreased by 12,000 in April and by over 49,000 in the last year. The extensive closing of retail locations has come to be known as the “retail apocalypse.” The number of store closings so far in 2019 is already larger than in all of 2018 as Business Insider reports:

“The retail apocalypse is raging on with almost 6,000 store closings announced so far in 2019 — more than the entirety of last year. According to a new report from Coresight Research, U.S. retailers have announced 5,994 store closings this year, compared with 5,864 store closings in all of 2018…Coresight Research CEO Deborah Weinswig predicted that this trend would continue. “The flood of store closures will likely continue for quite some time,” she said. An April UBS report predicted that 75,000 stores would close across North America from this year to 2026. It said e-commerce would make up a quarter of total retail sales by then.”

Retail workers affected by store closings can bring employers important transferrable skills such as customer service and inventory tracking. It remains to be seen how many of these workers will stay in the broad retail sector, including e-commerce, or be attracted into other sectors which can leverage their skills and experience.

Stats NZ released the March Quarter Labour Market Report which reported that the unemployment fell to 4.2% in the first three months of the year, from 4.3% in the final quarter of 2018. Economists expected a jobless rate of 4.3%. The number of people unemployed declined at a faster rate than the number of people in the labour force. The result was the unemployment rate falling close to its 10-year low of 4.0%, set in mid-2018. The labour market underutilisation rate was 11.3% in the first quarter, the lowest rate since the December 2008 quarter.

The Numbers

-4,000:  The economy lost 4,000 jobs in the first quarter of 2019.

4.2%: The unemployment rate fell to 4.2%.

2.0%: Overall wages increased  2.0% over the last year.

The Good

Stats NZ released the March Quarter Labour Market Report which reported that the unemployment fell to 4.2% in the first three months of the year, from 4.3% in the final quarter of 2018 and beating analyst expectations. The number of unemployed declined at a faster rate than the number of people in the labour force. As a result, the unemployment rate fell close to its 10-year low of 4.0% set last year. Compared to last year, 38,200 more people were employed, an increase of 1.5% – comprised of 25,400 women and 12,800 men.

The labour market underutilisation rate was 11.3% in the first quarter, the lowest rate since the fourth quarter of 2008. Underutilisation provides a broad gauge of untapped capacity in New Zealand’s labour market. In the first quarter, the number of people underutilised decreased by 14,000 to 324,000. There were 8,000 fewer underutilised women and 6,000 fewer underutilised men.

The Bad

For the first time in more than four years, the New Zealand economy lost jobs. In addition, the number of jobs created over the past year was slightly more than half the rate of the previous year.  Coupled together, these figures indicate a weakening and possible end of the steady job market growth seen in recent years. The slowing job market may have implications for the economy as a whole as Stats NZ Senior Manager Jason Attewell noted:

“Generally, employment growth tends to lag broader economic growth by about three months, New Zealand has seen a softening of economic growth as measured by gross domestic product over the last six months, and we now are seeing that softening come through the employment rate.”

Wage growth is also frustratingly low, even in a tight labour market, as the New Zealand Herald reports:

“ANZ economists have picked unemployment to remain flat at 4.3% although they acknowledge risks in either direction depending on the flow through from business confidence.

Regardless, it looks set to remain at levels which economists often describe technically as ‘full employment.’

That has led to some debate as to why wage growth has remained so subdued. In fact, it has been a major source of economic uncertainty globally as well as locally.

‘More significant government-related increases are likely to come later in the year,’ Westpac’s Gordon says.

‘Wage growth tends to lag the broader economic cycle. Even if the demand for new workers is fading, there appears to be enough accumulated pressure in the labour market to support a pickup in wage growth over the next couple of years.’

ASB’s Mark Smith described this year as a pivotal one for wage trends.

‘Our view had been that stretched labour market capacity and the boost to wages provided by minimum wage increases and moves towards more Fair Pay agreements would be sufficient to trigger a generalised firming in overall wages,’ he wrote.

‘The failure to date for wages to come to the party has challenged that view.’”

The Unknown

What will the impact of new technology be on New Zealand’s future workforce? The New Zealand government asked the Productivity Commission to conduct an inquiry into technological change and the future of work. The result is an issues paper that presents four possible scenarios as presented in CIO Magazine:

1. More Tech More Jobs: Technology adoption accelerates in this scenario, and the technologies adopted create more jobs than they replace. Both capital and labour productivity rise in this scenario, perhaps substantially.
2. More Tech and Fewer Jobs: This scenario, in common with the first one, is driven by accelerating technology adoption. However, it differs in that the technology adopted is, overall, labour replacing. Capital productivity rises substantially in this scenario, as firms increasingly adopt productivity-enhancing technologies. Labour productivity might also rise, as lower-skilled roles are increasingly automated. An expected consequence of this combination of drivers is widespread unemployment.
3. Stagnation: In this scenario, the pace of technological adoption slows. This could be due to declining innovation, as technological bottlenecks prove harder to overcome than expected. Alternatively, slower change could occur as technology adoption by firms slows – perhaps because newer technologies are less productivity enhancing for firms than those of the past.
4. Steady As: In this scenario, the technological drivers of labour market change over the next one-to-two decades stay within the bounds of New Zealand experience over the past one-to-two decades. This future offers ongoing change, according to the paper, but the rate of that change is roughly that which New Zealanders are familiar with.

Regardless of how or whether these scenarios take place in New Zealand’s economic future, New Zealanders appear to be unconcerned about losing their jobs to technology. The New Zealand Herald reports that a  recent Massey University study found 87.5% of respondents either disagreed or strongly disagreed with the statement “smart technology, artificial intelligence, robotics or algorithms could take my job.”