UK labour market statistics: more of the same tightness with early signs of a pick-up in wage growth?
21 Mar 2018
Institute director, Nigel Meager comments on the March release of ONS labour market statistics:
‘On the face of it, the latest employment statistics from the Office for National Statistics (ONS), which cover the three month period up to the end of January 2018, show a continuation of the slightly unusual pattern seen last month.
‘On the one hand, total employment is up again, with the employment rate yet again at a record high (75.3%). On the other hand this has not resulted in a reduction in unemployment, which although at very low levels rose slightly (by 24,000) on the previous month. The overall unemployment rate has been at 4.3 per cent for three months now, and it has not been lower since the mid-1970s. But, as was the case in last month’s release, the rise in unemployment has not been at the expense of people in work, but stems from a further fall in the number of economically inactive people, more of whom appear to be joining what remains a very tight labour market.
‘Further indicators of the tightness of the labour market can be seen by the number of unfilled vacancies, which was up again compared with the previous quarter (and now stands at 816,000). Likewise, as we also saw last month, the growth in total employment is almost entirely composed of full-time, permanent, employee jobs: self-employment is down again, as is the number of part-time employees and the number of temporary employees. These ‘non-standard’ forms of employment had been key components of the strong employment growth in recent years, but it now seems that, with a very tight labour market, unfilled vacancies and recruitment difficulties, employers are increasingly offering more ‘traditional-looking’ employee jobs. However, this growing pressure in the labour market is still not feeding through into real wage growth which remains flat over the last year, although nominal wages have increased slightly to 2.6 per cent, so this may be early signs of a pick-up.
‘Neither does it appear that a tight labour market is driving any improvement in labour productivity: total hours worked in the economy rose by 0.6 per cent on the quarter, but this is somewhat higher than the sluggish increase in GDP over the same period, so output per hour worked actually fell.
‘Overall, it remains a mixed picture with a tight labour market and unfilled vacancies bringing people into the labour market from economic activity, and perhaps leading employers to offer more regular, secure jobs. However, this is yet to feed through into real wage growth and stronger labour productivity.’
About Nigel Meager
Nigel is a labour economist by training, and a well-established international expert on labour market and employment policy issues. He has worked at IES since 1984, following posts at the Universities of Bath and Glasgow. He has been Director of the Institute since 2004. He has a long and varied research track record covering the functioning of national, regional and local labour markets, unemployment, skill shortages, labour market flexibility, changing patterns of work and equal opportunity policies and practices.
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