The level of those working in the United Kingdom is at its highest point since comparable records have been kept. This is just one of the positive historic milestones reported in the February Labour Market Report released by the Office for National Statistics.
- Wages rose 3.4%, the highest year-over-year level in more than a decade.
- The number of people working in the UK rose by 167,000 to 32.6 million. This is the highest figure since records began in 1971.
- The unemployment rate remained at 4.0%, the lowest rate since the three months spanning December 1974 to February 1975.
- At 3.9%, the unemployment rate for women fell below 4% for the first time since records have been kept.
- 444,000 more people were working in the UK than a year earlier.
- 870,000 job vacancies were reported, the highest since comparable records began in 2001.
Where is Brexit’s Impact on the Job Market?
Another monthly report with record-breaking employment numbers seems to indicate that Brexit has not yet had an impact on the UK’s employment situation. However, as 29 March approaches, the date when the UK is scheduled to leave the European Union, there is still no formal agreement on post-exit details. Because of this, there are expectations that job growth will not continue at the current rate. As the Guardian reports:
“Anybody expecting the Brexit impasse to harm the UK’s labour market has so far been proved wrong. Employment is at its highest ever level, the number of job vacancies has hit a new record and the unemployment rate for women has dropped below 4 percent for the first time. Growth slowed in the final quarter of 2018, but the dole queues shortened. Crisis, what crisis?
One possibility is that because the latest jobs and wages data from the Office for National Statistics only covers the period to December, it might not capture more recent surveys suggesting that firms have become warier about hiring since the turn of the year.
Even so, the ONS assessment was unambiguous: the labour market remains robust after a 440,000 increase in employment over the past year. The strong demand for labour is being reflected in a number of ways: by wages growing faster than prices, by the 57,000 fall in the number of people on zero-hour contracts and by the fact that most of the jobs created were full-time.
Britain continues to be a jobs magnet. The number of workers from the EU – and eastern Europe in particular – has fallen but the drop has been more than compensated for by an increase in migrant labour from the rest of the world, primarily Asia and the Americas.
Employment is a lagging indicator. It tells us how the economy was faring in the past but is not always the best guide to what is going to happen in the future. And, clearly, if the UK were to leave the EU at the end of March without a deal there would be a period when the labour market would weaken. The duration of that period would depend on the extent of disruption and strength of the policy response from the Bank of England and the Treasury.”
Challenge for UK Employers: Record High Vacancies Combined with Skills Shortages
The booming job market can be interpreted as a sign of optimism by UK businesses. Why create jobs and hire workers unless growth is expected? Yet this optimism is tempered by the challenge of rising wages and a shortage of high-demand skills. The difficulties of hiring in this environment can result in a negative effect on economic growth. As reported by the BBC:
“Looking at the average earnings figures, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “With surplus labour extremely scarce and job vacancies rising to a new record high, workers are having more success in obtaining above-inflation pay increases.
‘Looking ahead, we doubt that wage growth will slip below 3% this year.’
Despite the wage increases and low unemployment figures, Suren Thiru, head of economics at the British Chambers of Commerce, did not think that struggling High Streets would benefit.
He said: ‘The uplift to consumer spending from the recent improvement in real pay growth is likely to be limited by weak consumer confidence and high household debt levels.
‘The increase in the number of vacancies to a new record high confirms that labour and skills shortages are set to remain a significant a drag on business activity for some time to come, impeding UK growth and productivity.’”
Exiting Britain: Honda Bids Farewell
Just before the February report was released, Honda announced that it was closing its plant in western England in 2021 potentially resulting in a loss of at least 3,500 jobs and possibly many more. The AP reports:
“Honda’s president and CEO, Takahiro Hachigo, said the decision was not related to Brexit, but was based on what made most sense for its global competitiveness in light of the need to accelerate its production of electric vehicles.
Still, experts say the uncertainty surrounding Brexit will likely have been a contributing factor in a decision like Honda’s. There is no clarity on what leaving the EU will mean. In a worst case, it could lead to heavy tariffs and border checks, raising costs and slowing deliveries.
That comes at a time when the industry is already in serious flux, with manufacturers shifting to cleaner cars, coping with more tariffs and a slowing global economy.
‘We still don’t know what sort of changes Brexit will bring at this point,’ said Hachigo. ‘We have to wait until we have a better idea about the situation.’”
While Honda may be taking a cautious approach to the ramifications of Brexit, other employers are pressing ahead with aggressive hiring plans. Brexit has not yet become a reality, although it is scheduled to happen next month.