Is UK Labour Market Starting to Falter?
Employment, Hiring, News / 17 October 2019
Employment in the UK has remained stalwart so far, despite global trade wars and Brexit free fall. Much of this resilience has come from the strategy employed by UK businesses – They have continued to hire new staff, which is a much safer bet than long term investments in such an unpredictable climate. One knock-on effect of this has been rising wages, as employers attempt to keep skilled staff on the payroll in the face of an ever-decreasing pool of candidates.Even in light of the strength of the labour market and employment sector, many experts have been warning that problems may be on the horizon. One sign is that already stalling productivity may now be starting to decline. According to the most recent research from the Office of National Statistics, we may well have reached that horizon.
Current Trends
The latest Labour market estimates are something of a mixed bag. From June to August, the employment rate was higher than the previous year (by 0.3%), but down by 0.2% compared to the same period last quarter. Furthermore, employment rates for women dropped 0.3% compared to last quarter, although they were higher than the previous year. It’s important to note that the increase in the State Pension age for women has pushed up the figures. Additionally:
- The overall employment rate was estimated to be slightly lower than last year, at 3.9%, with a slight increase of 0.1% over the previous quarter.
- Economic inactivity has also been estimated to be lower than last year, but slightly up compared to the last quarter.
Unemployment is also now starting to level off. Estimates for those out of work have started to creep up, compared to the previous quarter (by 0.1%), although they are still lower than last year. We find the same pattern with earnings growth too. While wages have risen fairly steadily (although whether this has actually translated into increased earnings is questionable), salary growth is also looking to have peaked – the period of June to August 2019 saw a slight drop in fact, to 3.8% from 4%.
Job vacancies are also falling at a sharp rate. This is no surprise, however, as they have been in decline since earlier this year. The ONS estimates suggest that there are around 34,000 fewer jobs available than the previous year, with employment openings down 11,000 from the previous quarter.
Future Possibilities
The seeming invincibility of the UK job market so far is certainly something to celebrate, but the problem is that exponential hiring and lowering unemployment have to stop somewhere. Lack of provisioning for what happens when they start to peak, as it looks like they are now, is something that could have serious implications.
Many businesses know this of course – hiring is a safer bet than investing, as mentioned earlier. If the current trends are accurate, then we could see a major spike in unemployment in the coming months, as companies start to shed some of the workforce they hired in the last few years.
Whatever happens, it’s guaranteed to hinge on how Brexit plays out. If there is at least some kind of clear way forward, deal or no deal (sorry Noel), then perhaps the potential for a complete undoing of the labour market can be avoided.
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