Labour market still on a roll

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The UK's labour market data has ceased to surprise. Employment has been steadily climbing for the past year and was up 108,000 on the month. The latest statistics also show the unemployment rate hit 6.5% in May - down from 7.8% a year ago and the lowest since the beginning of 2009.

Unemployment rateSource: National Statistics

Employment growth was seen across all age groups and in both full-time and part-time employment - although the former was stronger and average hours worked nudged a bit higher too. With the more up-to-date figures on the numbers claiming unemployment-related benefits dropping by a further 36,000 in June and the number of vacancies continuing to rise, for the next few months at least we should expect the employment data to be showing more of the same.

Not so fast...

While the employment data is roaring ahead, pay across the economy is showing relatively little movement.... still. Weekly pay (excluding bonuses) rose by 0.7% in the past three months compared with a year ago and factoring in bonus pay brings that rate of increase down to a meagre 0.3% - either way, running a far bit below the rate of CPI, which measured 1.9% in June.

There are inevitable sector differences, with manufacturing continue to be one part of the economy with faster growth in earnings.

Average earnings growth% change past three months on a year agoSource: National Statistics* Public sector exc financial services

Looking ahead on the pay front the data on overall earnings growth could look substantially worse next month due to significant growth in bonus payments 12 months ago, but these effects will drop out the following month, when earnings growth should come back to current levels.

Does this change anything?

From the MPC's perspective probably not. The employment data say raise rates, the wage numbers say hold off for now. It seems as though the Committee will need to see some concrete signs of productivity picking up and that feeding through to higher pay before they'll make their first move. And whether that comes before the year is out is yet to be seen.

EEF will be blogging on our own Pay Survey later this week

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Chief Economist

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