- Revised population estimates mean the labour market has not been quite as resistant to the pandemic as was previously thought. The jobless rate dipped in May to 4.8%, but the series’ recent history was revised up slightly.
- However, employment is still emerging from the pandemic with a relatively small negative impact. Meanwhile, headline pay growth increased to a record high in May, but comparisons with a weak 2020 and compositional effects flattered the rise.
Martin Beck, senior economic advisor to the EY ITEM Club, says:
“The latest labour market numbers showed job creation continuing to benefit from the economy’s reopening. The number in work in the three months to May rose 25,000 on the previous quarter, while unemployment fell 68,000. And timelier PAYE data showed 356,000 more people in paid employment in June, building on earlier significant gains over the spring. This has undone almost 80% of the negative impact on payroll numbers since February 2020.
“However, the ONS has revised population estimates to better reflect the demographic impact of the pandemic, and this has revealed a bit more slack in the labour market than previously thought. The Labour Force Survey jobless rate in the three months to May dipped to 4.8% from 5% in the previous quarter. But the latter was revised up by 0.1 percentage points, while the employment rate was cut by 0.5 percentage points. However, the pandemic has left a relatively small negative impact on the labour market when set against the fall in GDP. And while the unemployment rate may creep up in the second half of 2021 as the furlough scheme winds down, joblessness likely peaked late last year.
“Meanwhile, pay growth broke new grounds in the three months to May, reaching 7.3% year-on-year, the highest since the series began in 2001. But employees returning to work from furlough and the concentration of job losses over the last year in low-paid roles continued to boost the headline number. These effects should fade over time, particularly if job creation skews towards lower-paid roles in areas such as hospitality and leisure as the recovery proceeds.”