16 August 2022
If you are covering the latest UK labour market statistics, please find below a comment from Paul Craig, portfolio manager at Quilter Investors:
“Figures released this morning show a labour market that is ignoring signs of an impending recession as unemployment rates remained relatively unchanged over the month. The employment rate remains below pre-pandemic levels, so while some economic activity is beginning to show signs of weakness, there is still room for recovery in other areas. We just have to look at the number of job vacancies out there with 1.274 million workers needing found. Clearly that isn’t going to happen quickly, but the Bank of England will believe it is on the right path with 50bps interest rate rises while the labour market remains this tight.
“Employees did see their pay, excluding bonuses, rise by 4.7% from April to June, but this will be little comfort given where inflation is. Even with a rise this high, they have experienced real terms cut of 3%. While Andrew Bailey won’t want to see pay rising too quickly, we are headed for a difficult winter where some parts of the population will be struggling with energy bills and the cost of food. If inflation continues on its trajectory to the forecasted 13% this is only going to exacerbate the situation further. The pay demands we have seen in the public sector of late are only going to get louder.
“All in all, it is a clouded picture for policy makers and central bankers. Economic activity in the UK is grinding to a halt despite the jobs market holding up. Whether or not these workers will be in a position to handle further rate rises remains to be seen, but with pay lagging as inflation soars, they might have no choice but to deal with it. This will ultimately put further pressure on the next incumbent of No.10 to provide support at a time when earnings are failing to keep up with the cost of living.”
