13 May 2025
If you are covering the latest UK labour market statistics and the Labour Force Survey quality update from the ONS, please see the following comment from Lindsay James, investment strategist at Quilter:
“Alongside this morning’s UK labour market statistics, the Office for National Statistics (ONS) has released an update on its Labour Force Survey (LFS). The LFS has been under warranted scrutiny for some time, as concerns over its accuracy have resulted in a relatively unreliable picture of the UK jobs landscape. In its latest update, the ONS has indicated that the quality of the LFS is improving, so with hope the monthly data will become increasingly accurate as it is further developed. Despite its limitations, it remains the sole source of the UK’s labour market data and will therefore still be relied upon, albeit with caution, by the Bank of England and policy makers.
“While the labour market has been surprisingly resilient thus far, this latest print may prove to be the start of the expected slowdown. The unemployment rate ticked up slightly to 4.5% in January to March 2025, while payrolled employee numbers fell by 47,000 between February and March 2025 and by 63,000 between March 2024 and March 2025. Job vacancies also dropped by 42,000 on the quarter to 761,000 in February to April 2025, marking the 34th consecutive quarterly decline.
“Growth in regular pay, excluding bonuses, fell to 5.6% between January and March 2024, as did total pay, including bonuses, which dipped marginally to 5.5%. Despite the slight fall, with inflation currently at 2.6%, wage growth is still outpacing inflation at more than double the rate.
"Inflation is still expected to climb to 3.5% in Q3 before falling, but one scenario highlighted by the recent Bank of England MPC report suggested this risked second round price effects which could see high wage growth becoming more persistent. However, members of the monetary policy committee have still pinned their hopes on a significant slowdown in wage growth throughout the year, so we may eventually see the two draw level.
“Recent GDP figures have been better than expected, though we await the latest update on Thursday and the UK-US trade deal will have given businesses more certainty. However, with the changes to national insurance now bedded in and the full details of the trade deal still to be ironed out, businesses are still facing challenges, and we could see the labour market weaken further in the coming months as a result."
