UK unemployment starts to climb back up

12th August 2015


UK unemployment rose 25,000 in the second quarter, the first time it has increased in two consecutive months for two years, sparking worries that the jobs market could be levelling-off.

The figures released on Wednesday by the Office for National Statistics also highlighted that wage growth slowed to 2.4% as compared with 3.2% on the previous month.

However the magnitude of the rise in unemployment was small enough to leave the overall rate unchanged at 5.6%,

Ben Brettell, senior economist at Hargreaves Lansdown believes that while these figures are disappointing, they should not prove cause for concern. He said: “The pace of job creation has been expected to slow for some time as the recovery matures. Growth in pay, although slower, remains robust, and combined with zero inflation this is good news for the UK consumer. This in turn should be positive for economic growth, which I expect to pick up during the second half of the year.

“It is possible that the disappointing labour market performance in the second quarter was due to firms postponing hiring new workers because of uncertainty over May’s election. If that is the case, we should see a resumption of the labour market recovery in the third quarter.”

David Stubbs, global market strategist at JP Morgan Asset Management added: “Perhaps the biggest news in the report was the slowdown in average weekly earnings growth from 3.2% year-on-year in the previous report to 2.4%. This slowdown—driven by the private sector—was spanned all industries and mainly focused on bonuses. Again, this looks like a transitory election-related issue. Indeed, the ratio of unemployed people to vacancies remains below three, suggesting that earnings growth should gradually accelerate, thanks to a rebound in vacancy levels to near the highs for this cycle.”

Presently the Bank of England is closely watching the labour market for signs that ‘slack’ in the economy is being taken up before raising interest rates. Wage growth is thought to be a particularly important indicator of the degree of slack – subdued wage growth in the recovery thus far has signposted that the economy could grow at a faster rate without pushing up inflation.

Brettell noted that if the labour market does indeed start to level off, this could support the case for leaving interest rates on hold.

“The Bank surprised markets last week with only one member voting for a rate hike. The minutes of its latest meeting revealed concerns that the strength of the pound and recent further falls in the oil price would mean inflation increasing more slowly than previously thought,” he said.

2 thoughts on “UK unemployment starts to climb back up”

  1. David Lilley says:

    This post is mischievous, Not written by a man of the world.
    The galloping jobs creation of the recent past was due to the “enterprise allowance”. 270,000 young people were persuaded by their Job Centre to start their own business. They have no business plan, we will never see them on Dragon’s Den, 3% cannot read and write despite £66,000 being spent on their education. But none can say no to £3,000 cash.
    Suddenly they are gone from the unemployment register and are now classed as a new start up businesses. When the £3k has gone they are back on the state but not registered as unemployed. Of course this mischief was unsustainable.
    Gordon Brown did the same thing. He shifted JSAs to ICB. The Sunday Times exposed this by sending healthy young reporters into every Job Centre in every city and major town to claim JSA and they all came out on ICB. The Job Centre staff wouldn’t permit them becoming unemployed with arguments like ICB pays better and “you have just said you have fallen out with your girlfriend, therefore you are depressed”.
    How could Labour get away with this mischief in broad daylight? Where were the BBC? Where were Robert Peston and Stephany Flanders? It took the Daily Mail to break the mischief by pointing out that 90% of the new jobs created in the previous 5 years had gone to guest workers. The ICB population increased to 3.5m, twenty times the target audience.
    Please comment.

    1. Jive Bunny says:

      “Please comment.” This is a first!! For the first and probably only time I’m in broad agreement with you David although remember, both Conservatives and Labour are equally guilty of this type of deceit.

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