UK employment increases despite end of mining scheme
The number of people working in Britain rose in the month after the government shutdown plans to increase, according to official data that will strengthen the case for the Bank of England to raise interest rates as early as next month to curb inflation. broadcast.
The figures, released on Tuesday by the Office for National Statistics, are the first hard evidence that the labor market is suffering from the expiration of the wage subsidy scheme, which is still supporting more than one million jobs in the last weeks of September.
The number of salaried employees rose 160,000 to 29.3 million between September and October, a sharp increase although September totals were revised down slightly.
This finding is consistent with early evidence from business surveys, which have shown that most employed workers return to work in October, with only a small fraction either losing their jobs or choosing to return to work. choose to leave the workforce. Governor of the Bank of England, Andrew Bailey, told MPs on Monday the unemployment rate looks “lower than our forecast”.
The state of the labor market will be the key driver of interest rate decisions by policymakers when they meet in December, with markets betting that the central bank will trigger the first rally. as of 2018. Both Bailey and Huw Pill, the BoE’s chief economist. , said on Monday that uncertainty about the potential fallout effect was a key reason the Monetary Policy Committee suspended this month’s rate hike.
ONS figures also show the average employment rate was 75.4% in the three months to September, up 0.4 percentage points from the previous quarter, while the unemployment rate fell 0.5 percentage points. percent to 4.3% – a larger drop than analysts expected. One-month data for September showed the unemployment rate fell to a low of 4%.
There is also evidence that the UK has shared in wave of resignations swept the United States, as workers took advantage of a vibrant labor market. The ONS says job-to-job transfers are at a record high and this is driven by resignations, not layoffs. The number of vacancies also hit a new record high in the three months to October.
Prime Minister Rishi Sunak said the figures were “a testament to the extraordinary success of the furlough scheme”.
However, business groups said Lack of labor is putting the economic recovery at risk, with the British Chamber of Commerce saying chronic staff shortages are “increasing” and could force companies into a “long-term decline in capacity”. longer”.
Some analysts warn that salaried workers may have returned to their jobs with fewer hours and lower wages than they would have liked, while much of the increase in employment was due to an increase in part-time work and young people taking up non-contract hourly jobs.
Samuel Tombs, at consulting firm Pantheon Macroeconomics, notes that overall employment has not grown as quickly as the payroll figures suggest, because many people who were previously considered self-employed are now paid.
But Tony Wilson, director of the Employment Research Institute, said: “Never before have we seen jobs filled at a faster rate than now. . . However, despite this, we are seeing labor shortages across all sectors of the economy, and the job market is tighter than at any time in the last 50 years.”
He added that the shortage was in large part due to growing inactivity, with nearly a million people missing in the workforce compared with pre-pandemic trends – over the past year due to early retirement. and more and more people are not working due to poor health.
Gerwyn Davies, an adviser at CIPD, the body for HR professionals, warned that, with the supply of labor from the EU and above “at best”, rising inflation “could be compounded with difficulties” difficulties in recruitment lead to serious effects”.
However, it is not clear from the ONS data how much labor shortages are driving wages – a big problem for monetary policymakers who want to prevent a temporary rise in inflation from turning upside down. into a persistent wage price spiral.
The ONS’s headline measure of weekly earnings growth, excluding bonuses, showed employee year-over-year growth of 4.9% in the three months to September – implying earnings growth by real conditions are 2.2%, stronger than the pre-pandemic rate.
The ONS warned that this figure has been distorted, however, due to temporary impacts related to the pandemic. After adjusting for these, headline earnings growth could be “as low as 3.4%,” the ONS said – implying that earnings outstrip inflation over the period in question, but could lag. behind the cost of living increase in the coming months.
The Monetary Policy Committee will be able to examine employment data for another month before its next meeting in December, but analysts say that based on existing labor market trends there will be no barriers to rate increase.
“There is nothing here to give cause for concern to the Bank of England,” said Kitty Ussher, chief economist at the Institute of Directors, while Philip Shaw, economist at Investec, said the numbers “reinforce the possibility of policy tightening next month”.
Paul Dales, chief UK economist at consulting firm Capital Economics, said: “Today’s release gave the bank an amber glint and the next labor market release in December 14 might give the green light for a rate hike.”