This month’s UK Labour Market Report, which covers July through September, brings to mind a gathering of friends sitting around the dinner table when a long-anticipated guest bursts through the door and breathlessly announces, “I have good news and bad news, which do you want first?” This month’s report contains elements that are unquestionably good and bad, but there are some items where interpretation varies.
First, the objectively good news: The number of employed people rose by 23,000, bringing the employment total to a new high of 32.41 million, which is 350,000 more than a year earlier. And the bad news? The UK unemployment rate has risen to 4.1 per cent, up from a 43-year low of 4.0 per cent. In the last quarter, 21,000 UK workers lost their jobs.
Below, we focus on factors that are up for interpretation.
The growth in UK wages accelerated to a near 10-year high. Average nominal earnings (wages excluding bonuses) rose 3.2 per cent from the same quarter a year earlier. This is the largest increase since December 2008 and higher than the expected 3.1 per cent predicted in a Bloomberg survey.
The rise in wages is continuing to outpace prices, which is a relief for those impacted by the inflation surge following the Brexit vote. While the rate of pay growth may be greeted positively by workers, it is a concern for employers who are feeling the pressure to raise wages to retain and attract talent in a tight market.
Job vacancies hit a record high of 845,000, which is welcome news for job seekers who find themselves “in the driver’s seat” given the high demand for workers. A large number of job vacancies can be perceived as a sign of a robust economy with many enterprises seeking to grow.
However, this high number of open positions can take a toll on both employers who have to ensure profitability with a smaller number of workers and the workers who may be required to take on extra responsibilities. Given the number of opportunities available, workers may feel the lure of quitting for a more lucrative position when they carry a burdensome workload.
EU Nationals as Part of the UK Workforce
There were 132,000 fewer EU nationals working in the UK than a year earlier, bringing the total to 2.25 million. This was the largest annual drop in the number of workers from Europe since the Office for National Statistics began keeping track in 1997.
The fall in EU workers was due to a decline of 154,000 workers from the eight eastern and central European accession countries that joined the EU in 2004. This was offset by an increase of about 23,000 workers from other EU countries. The Financial Times reports:
“Stephen Clarke, senior economic analyst at the Resolution Foundation think-tank, said that the fall in EU migrant workers ‘shows that Britain’s labour market is already changing ahead of its exit from the EU.’
‘Firms who employ a large share of migrant workers need to think now about adjusting to a lower migration environment, in terms of the workers they employ, what they produce and how they operate,’ he said.”
This may be music to the ears of those who hoped that Brexit would bring more job opportunities to UK nationals. For others, the decline in EU workers exacerbates an already difficult skills shortage and increases the pressure to raise wages to attract home-grown talent.
If we check back in with the gathering of friends sitting down to dinner, some may have heard mostly good news and some mostly bad, but they can all agree that there is much to digest as the year draws to a close and Brexit looms ever closer.