This morning has brought a reminder of the sometimes contrary nature of economic statistics. The UK has just experienced a quarter of what even in past times would have been regarded as decent GDP growth at 0.6% for the first quarter. But we see employment doing this.
The UK employment rate for January to March 2024 (74.5%) remains below estimates of a year ago (January to March 2023), and decreased in the latest quarter.
On the upside it does suggest a rise in productivity which is an issue that has attracted the attention of the chattering classes, which is usually a sign of a change ahead in itself. But on a basic level we have a mismatch so let us look deeper.
The annual decrease was largely because of part-time workers, while the quarterly decrease was largely because of part-time workers and the full-time self-employed. Full-time employees increased both on the quarter and on the year.
So part-time work has been falling and there may be a switch to full-time. As the release avoids the actual numbers let me help out. Employment is 33 million and it fell by 178,000 in the latest quarter making it some 204,000 lower than a year ago. For perspective that leaves the number some 93,000 lower than pre pandemic. However it is also true that all of these changes are smaller than the confidence interval of 268,000.
Hours Worked
The issue of what do the numbers really tell us moves on as we look at what has been a better guide to the economic state of play.
In the latest period (January to March 2024), total actual weekly hours worked increased on the quarter to 1.06 billion hours and are above the level a year ago (January to March 2023). Both men’s and women’s hours worked increased on the quarter.
The rises here are small of 9.7 million hours on the quarter and 1.1 million on the year. But we get a reinforcement at least of the idea of a switch from part to full-time work. At least in this arena we get actual numbers as the definition in the survey is rather wishy-washy. Overall we still have a productivity improvement.
Unemployment
It is not necessarily true that lower employment leads to higher unemployment as there is also inactivity. But this time it did.
In the latest quarter, the unemployment rate increased.
As that is rather vague it rose to 4,3% which is up 0.5% this quarter and 0.3% on a year ago with the detail below.
In January to March 2024, those unemployed for up to 6 months increased, and remain above levels a year ago (January to March 2023). Those unemployed for over 6 and up to 12 months and those unemployed for over 12 months also increased in the latest quarter following falls in the second half of 2023, and are above estimates of a year ago.
Wages
The numbers here were much more welcome in my opinion.
Annual growth in regular earnings (excluding bonuses) was 6.0%, and annual growth in employees’ average total earnings (including bonuses) was 5.7%.
So wage growth has been pretty consistent as total pay is up 0.1% on last time. Also the consistency theme continues below.
Annual average regular earnings growth for the public sector remains strong at 6.3%; for the private sector, this was 5.9%, with growth last lower than this in April to June 2022 (5.4%).
Bonuses were strong too.
Total bonuses in March 2024 were slightly higher than in March 2023 and are the highest on record.
It is hard not to have a wry smile at the numbers below as the finance sector is so often the leader of the pack ( in spite of many promises of change)
Both the manufacturing sector and the finance and business services sector saw the largest annual regular growth rate at 6.8%.
Also we can review the two numbers above as a rare triumph of government policy as the caps on bankers bonuses were lifted around 6 months ago. Indeed if we look deeper via the single month figures we see that it looks to be going further as total pay for the finance sector rose at an annual rate of 8.4% in the single month of March.
Overall though total pay growth has been between 5.5% and 5.8% for the past five months which is very consistent for this series. With inflation on the decline this means we are in a better and better phase for real pay.
Using CPI real earnings, in January to March 2024, total pay was 2.1%.
Should wage growth continue on its present path then there will be a welcome rise in real pay and maybe we may reverse a decent part of what has been a nuclear winter for it. The credit crunch era falls were added to by the pandemic and sadly our official series misses this as they never fully adjusted for the issue that led me to report the earnings figures to the Office for Statistics Responsibility back in February 2021.
Bank of England Chief Economist Huw Pill
We can now look at the UK labour market via a speech given this morning by the Bank of England’s Chief Economist. Newer readers might like to know that Huw Pill has so far in his tenure managed the quite remarkable feat of being wrong about everything. That continues the wages theme of consistency although not in a good way.
In his presentation, Pill said official data published earlier on Tuesday were consistent with a small further decline in the pace of private sector regular pay growth in the first three months of 2024.
But he cautioned against reading too much into other signs of a weakening of the inflationary heat in the jobs market.
“There has been an easing of the labour market but it still remains pretty tight by historical standards,” he said. ( Reuters)
My first thought is why is he swerving to regular rather than total pay? But anyway the theme there gets rather torpedoed by this extra piece of data.
Early estimates for April 2024 indicate that median monthly pay was £2,381, an increase of 6.9% compared with the same period of the previous year.
That represents a 0.5% rise in the annual rate on last time. There are reasons to discount this via the large rise in the National Living Wage, so we will need more data for the smoke to clear. But this presented an excellent opportunity for Chief Economist Pill to explain the different wages numbers and what they mean. Admittedly someone would have had to explain this to him first. But it would have been much more useful than what he has actually said which is rather non-commital.
Comment
Today’s release reminds us of the leads and lags in official data. As all other estimates show a better economic performance in 2024 so far the fall in employment seen in today’s release relates to 2023. Even the hours worked numbers hint at this. We can take that further to the Bank of England where to my mind it has confused leading and lagging issues so much that it is trying to control something which happened as much as 2 years ago. What I mean by that is that the rise in the National Living Wage is a response to PAST inflation as are many wage rises right now.
So the Bank of England thinks the labour market is tight because it failed to move promptly to deal with inflation and thus is suppressing a symptom of it rather than a cause. Also if we take the establishment in the round it is also the loosening of bankers bonuses which has boosted wages so that we have one arm of government trying to control pay as another gives it a push. How did we let such fools govern us?