ONS August 2023 Labour Market Review

The ONS has published the latest labour market overview.  

It looks like the Bank of England's toxic medicine of interest rate rises is slowly but surely rippling through into the economy and bringing the UK closer to recession.

Here's the headlines:

  • Job vacancies in the quarter to July 23 fell by 66,000
  • Unemployment rose by 0.3% to 4.2%
  • Regular pay growth was 7.8%
In otherwords unemployment is rising and the pool of available jobs is falling.

The ONS mentioned the regular pay growth was due the NHS one-off bonus payments made in June 2023.  The report covers the period April, May and June.  Some other data covers other periods.

This payment was a one-off payment of between £900 and £1190.  With the NHS reported to have a workforce of around 1.7 Million this equated to an overall payment of more than £1.53 Billion by tax payers.

Interestingly the ONS neglected to mention that the pay growth for Apr-June 23 compared to Apr-Jun 22 included an increase in the national minimum wage.  

The adult rate increased from £9.18 to £10.18 (+10.89%) and the national living wage increased from £9.50 to £10.42 (+9.68%).

Approximately 1.6 Million workers are on minimum wage - around 5% of all workers.

These increases are significantly higher than the aggregate 7.8% increase.

Therefore this mandatory increase makes up a chunk of the 7.8% increase in wage growth.  Although clearly businesses are increasing salaries to retain people it shouldn't automatically be assumed these increases are discretionary - the government has mandated increases for millions of workers.

It is highly likely the BoE will look negatively at this increase in wage growth despite this being old news. The BoE tends to cite the Labour Force Survey which is based on a sample of approximately 50,000 people compared to the ONS data which is payroll data for the whole country. 

Here's the ONS disclaimer on the LFS data:

The population totals used for the latest Labour Force Survey (LFS) estimates use projected growth rates from Real Time Information (RTI) data for EU and non-EU populations based on 2021 patterns. Therefore, the total population used for the LFS, does not account for any changes in migration, birth rates, death rates, and so on since June 2021. As such, levels estimates may be under- or over-estimating the true values and should be used with caution. Estimates of rates will, however, be robust.

Anyway the outlook is poor.  I await the forthcoming inflation data to see what other bad news lies in store for us.

 



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