The June 2019 Labour Market Report released by the Office for National Statistics includes the three months covering February 2019 through April 2019. The unemployment rate held at 3.8%, continuing at a level not seen since 1974. Nominal wage growth was 3.4%. The growth in jobs and wages beat analyst expectations.
- The UK employment rate was estimated at 76.1%, higher than a year earlier (75.6%) and the joint-highest on record.
- The UK economic inactivity rate was estimated at 20.8%, lower than a year earlier (21.0%) and close to a record low. This statistic reports the number of people who are economically inactive as a percentage of the total working age population (people aged 16 to 64 years). A person of working age is counted as economically inactive if: they are out of work and have not been actively looking for work in the past 4 weeks.
- The employment level for women was 72.0%, the highest since comparable records began in 1971.
Modest Job Gains Compared to Previous Months
The report showed impressive year-over-year job gains. Estimates for February to April 2019 show 32.75 million people aged 16 years and over working, which is 357,000 more than for a year earlier. This annual increase was due entirely to more people working full-time (up 402,000 on the year to reach 24.15 million). Part-time working showed a fall of 45,000 on the year to reach 8.60 million.
The 32,000 job increase in the June report is less than a third of the 99,000 jobs added in the May report. The relatively low number indicates a slow-down in hiring, at least temporarily. It is the lowest number of new jobs since the three months leading to August last year. The reason for the decreased number of new hires may be due to employers having a difficult time hiring new staff in a tight labour market.
Economic uncertainties, primarily driven by Brexit, may be the reason that employers have been on a hiring spree and despite slowing growth rates, the job growth trend may continue as the Financial Times reports:
“In the last three years, the UK labour market has shown resilience, despite a weakness in investment growth.
‘Employment growth has undoubtedly been lifted by businesses preferring to employ rather than commit to investment given current heightened uncertainties,’ said Howard Archer, chief economic adviser at EY ITEM Club, a consultancy. ‘Employment is relatively low cost and easier to reverse if business subsequently stalls,’ he added.”
Healthy Wage Increases
Whatever the cause of low unemployment and continued hiring, the increase in year-over-year nominal wages of 3.4% is a sign that businesses are responding to consistently tightening labour market conditions. In the report released in August 2018 when unemployment was at 4.0%, the year-over-year wage increase was just 2.7%.
While the inflation rate rose to 2.1% in April, the rate of annual wage growth is still well ahead of it. The combination of increased wages and low inflation strengthens the buying power of UK consumers and potentially provides a boost to the overall economy. This point is underscored by the effect that the rate of increased wages reported impacted the nation’s currency as the pound strengthened in trading as The Express explains:
“This morning’s UK average earnings figures increased in April, exceeding the consensus expectation and rising to 3.4%, providing some uplift to the pound. This will be seen as good news by Sterling investors as rising wages normally translates to increased spending power, which in turn boosts domestic growth.”