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UK Employment Figures, February 2018: One Step Forward, Two Steps Back

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According to the latest data released today from the ONS, employment in the UK remains strong, wage growth continues to lag inflation, and unemployment unexpectedly ticked up for the first time in two years.

The latest labour market statistics release from the ONS gave further mixed news on the UK’s labour market.  This ‘one step forward, two steps back’ data shows new jobs are still being created – and yet unemployment has ticked up in the latest figures and wage growth is still lagging inflation.

While the increase in the jobless rate is modest, the last three months of 2017 saw the first quarterly increase in unemployment for nearly two years.  The increase in the unemployment rate was accompanied by a decrease in the number of people ages 16 to 64 who were economically inactive (not working and not seeking or available to work).  This may mean that the increase in the unemployment rate may not be as bad as it sounds if it’s driven by people newly choosing to seek work.

On the employment side, there were 88,000 more people in work compared to the previous quarter, a continued strong showing for job creation for the UK economy, although still leaving total employment a bit below last month’s record numbers.  

Wage growth has quickened a bit to 2.5% year-over-year, but still lagging inflation, which leaves real wages well below their peak in 2008 and lower than they were a year ago.  

One of the great enigmas of 2017 was why this tightness didn’t drive up the average Briton’s paypacket. Despite some modest progress at the end of last year, wage rises still aren’t keeping up with Britain’s stubbornly high inflation. With employers’ demand for new staff remaining strong – despite Brexit uncertainty – projections from the Bank of England are for pay to rise faster than prices in 2018.

What rises there are aren’t for everyone, and the Bank of England’s analysis in their latest inflation report also reveals the cost of staying put. People who moved jobs last year saw their earnings rise by an average of 7.3%, while those who stayed in the same role received an average rise of just 2.6%.

If nothing else, today’s jobs report shows just how finely balanced the tight labour market has become. The coming months are likely to see the pace of job creation slow, leaving another awkward question – will the economy have to trade employment growth for wage rises?