The labour market statistics once again resume their role as a ray of sunshine in the economic calendar, with this morning’s data showing that the labour market has continued to strengthen.
While there are a number of economic storms rumbling about in overseas markets, in the UK the labour market continues to look sunny, with good news as the ILO employment rate remains at near-record levels, and the ILO unemployment rate fell to 6.2%, its lowest level since the three months to September 2008. Our forecasts suggest that gradual continued improvement is likely, and unemployment should average 6.0% in 2015.
The positive outlook extends to manufacturing with the data showing that workforce jobs in manufacturing increased by 1.2% in the second quarter. This marks the sixth consecutive quarter of growth, the first time this has happened since 1993-95. Combined with the news that manufacturing vacancies have risen by an impressive 37% over the year this suggests the employment in the sector is on track to meet our forecast of 0.8% growth in 2014.
Still some clouds or showers about
Despite a generally cheery picture, there are some clouds in the sky. Average weekly earnings growth remains subdued. Across the economy as a whole, earnings (excluding bonuses) rose by only 0.7% in the year to July. This compares with the average in the five years before the recession of 3.8%.
While pay rises are likely to remain subdued throughout 2014, our forecasts suggest that whole-economy pay increases will rise above inflation as we move into 2015.
Better weather for manufacturers
The picture in manufacturing is somewhat stronger, with average earnings increasing 1.7%. Our own data shows a similar picture, last month our Pay Bulletin showed that while pay settlements in manufacturing had averaged about 2.4% over the last two years, the most recent data pointed to a slight uptick. The average pay settlement in the six months from February to July came in at 2.6%. Importantly, this includes April, one of the year’s major pay rounds, which is a good indicator for pay this year.
Tomorrow we release the next Pay Bulletin, so check back on the blog for further details.