UK unemployment has hit its lowest level since 1974, but there are signs that the job market’s resilience could be fraying. Britain’s unemployment rate edged lower to 3.8 per cent in the three months to March, from 3.9 per cent in the three months to February, according to the Office for National Statistics. The employment rate hit a record high of 76.1 per cent. Nearly 100,000 more jobs were added in the first quarter of 2019 compared with the previous quarter, showing the strength of the jobs market despite the turmoil surrounding Brexit. “Britain’s job market continues to defy wider economic uncertainty,” said Stephen Clarke, senior economic analyst at the Resolution Foundation. The ONS figures also showed that the proportion of women in work was higher than since records began in 1971. The increase partially reflects changes to the state pension age, which has resulted in fewer women retiring before the age of 65, but it also shows that fewer women are out of work for family reasons. In the first quarter, the number of women not in work because they cared for family dropped by 254,000 compared with the same period five years ago.
The number of EU nationals in work also rose to a record high of nearly 2.4m after an almost uninterrupted decline since the end of 2017. However, there are signs that the labour market might be softening. The number of jobs added in the first three months to March was below expectations and lower than the number added in the three months to February. While the number of self-employed increased, the number of full-time employees dropped by 55,000 compared with the previous quarter.
“Some tentative early warning signs suggest that the jobs market is entering a turbulent period,” warned James Smith, economist at ING. Nominal earnings growth also eased to 3.2 per cent from 3.5 per cent in the three months to February, reversing an upward trend that began last year. Adjusted for inflation, earnings levels were still below their pre-financial crisis peak and earnings growth was below its pre-crisis average. “Earnings growth are now showing signs of at least temporarily slipping back after trending up,” said Howard Archer, chief economic adviser at EY ITEM Club, an economic forecasting group.
Another sign that the job market could be softening is a fall in the number of vacancies in the three months to March, compared with the three months to January. However, they remain higher than in the first quarter of last year. UK productivity growth also fell for the third consecutive quarter, as companies continued to hire despite weak output growth. In the three months to March, UK output per hour worked dropped by 0.2 per cent over the same period last year, according to separate data from the ONS.
“Employment growth has undoubtedly been lifted by businesses preferring to employ rather than commit to investment given current heightened uncertainties,” said Mr Archer, “employment is relatively low cost and easier to reverse if business subsequently stalls.” Signs of softness notwithstanding, the UK labour market continues to be remarkably robust even as the UK economy slowed at the end of 2018. Economic growth accelerated again in the first quarter of this year, helped by firms stockpiling due to rising Brexit uncertainties. Despite the tight labour market and the 0.5 quarter on quarter growth, the central bank is not expected to change its monetary policy imminently. “The Bank of England looks set to maintain a wait-and-see approach on interest rates until the Brexit situation becomes clearer” said Mr Archer.
Source: Financial Times