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The latest official labour market statistics, published by the Office for National Statistics (ONS), show another big rise in the number of people in employment (up 152,000 in the three months to February), increased job vacancies, fewer redundancies and welcome falls in both the number of people unemployed (down 39,000 in the quarter) and those economically inactive (down 36,000). Yet despite this pay pressures remain subdued.
According to John Philpott, chief economist at the Chartered Institute of Personnel and Development (CIPD), the jobs, unemployment and pay figures will provide some comfort to the Government after a run of poor economic statistics and reassure the Bank of England that pay rises pose little threat to inflation.
However, Dr Philpott warned that the latest official figures were at odds with other indicators of the strength of demand for workers which could spell tougher times ahead.
He said: “Even allowing for lags between output, jobs and unemployment, the UK labour market is still behaving as though the economy were chugging along very nicely rather than on the verge of a significant slowdown. This could bode well for the resilience of employment in the coming months – especially with pay pressures sufficiently subdued not to deter further cuts in interest rates – which would greatly protect the UK economy from the possibility of a period of outright recession.”
If so we could be in for a repeat of what happened during the last economic slowdown in 2005 when employer concerns about talent shortages led to ‘labour hoarding.’ Employment levels generally held up, with employers cutting hours worked by staff and curbing average pay rises rather than resorting to layoffs. Today’s ONS figures showing a substantial reduction in average hours worked by full-time staff would support this possibility, as would signs of continued pay restraint.
“It is still too early, however, to breathe a sigh of relief. Much will depend on the severity of the economic slowdown and the impact this has on business and consumer confidence. Indeed the official jobs statistics paint a far rosier picture of the state of the labour market than independent surveys, including those conducted regularly by the CIPD and KPMG. These point to weaker hiring intentions and the prospect of substantial job losses – and are somewhat more in keeping with news emerging daily from the City and those parts of retail sector hardest hit when increasingly cash strapped households cut back on non-essential spending.”
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