14 June 2022
If you are covering the latest UK labour market statistics, please see the following comment from Paul Craig, portfolio manager at Quilter Investors:
"Figures released this morning, show that employment levels have once modestly risen by 0.2 percentage points on the quarter to 75.6% but is still below pre-coronavirus (COVID-19) pandemic levels. We just have to look at scenes plaguing airports up and down the country to see that the nation is gripped with staff shortages, and this is well illustrated by the fact the number of job vacancies in March to May 2022 rose to a new record of 1,300,000. Part of the problem the airlines are facing is that it takes longer to train new workers than layoff existing workers. Due to the nature of the pandemic, airline staff were made redundant in their droves and now people are back travelling airlines and airports are scrambling to fill positions.
"Elsewhere, employees received an average total pay increase of 4.2% in February to April 2022. Although this remains relatively subdued, any increase in wage will be cause for concern for policy makers due to rising inflation. Earlier this year, Andrew Bailey went as far to urge workers not to ask for big pay rises in the face of spiralling inflation. Ultimately, this all translates to people’s earnings not keeping up with inflation and hampering people’s purchasing power.
"But with the employment market tight and inflation running rampant, the Bank of England will feel they are on the correct course when they come to raise interest rates on Thursday – providing no last minute surprises. Certainly, a labour market such as this does not scream an impending recession, but this goes to show how difficult a task Bailey and co has when deciding monetary policy. Today’s good news that employment is back on the rise could muddy the water for the Bank of England and actually in a perverse way might have found it easier to deal with a set of data which shows rising unemployment.
"Yesterday, we saw GDP for April miss expectations and show negative growth of 0.3% for the month. While this could be a minor blip it could also be the start of something much more worrying and as such it will be important to watch the employment figures closely. If these show any sign of weakness creeping in the months ahead the market reaction may be volatile, and the Bank of England may have to think about reversing course in order not to stymie economic growth at a point when households show real strain from the cost of living crisis."
