Robust jobs performance continues but indicators suggest there may be trouble ahead for the labour market - EY ITEM Club comments

16 November 2016

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  • Headline unemployment falls and employment rises…
  • …but other job market indicators suggest that there may be trouble ahead
  • UK’s productivity weakness shows no sign of going away

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“Labour market data for the three months to September ostensibly offered a number of reasons to think that the UK’s robust jobs performance continues. The LFS unemployment rate dropped for the first time since April, while vacancy levels reached a six month high, pushing down the number of unemployed people per job to the lowest level since 2001.   

“But there were inklings of potential problems ahead. The rise in employment was well down on the increase recorded from April-June. And the claimant count measure of unemployment increased by almost 10,000 in October, the third consecutive monthly rise, something not seen since 2011.

“Annual pay growth remained at 2.3% on a three-month average basis, suggesting that workers are in a weak position to offset what is likely to be a sizeable rise in inflation over the next year. Indeed, the capacity of employers to pay more will not be supported by continued weak productivity growth. Overall, prospects of the labour market taking a turn for the worse in the not-too distant future are looking more likely.”