In Focus Risk
Employment figures show promising trend
The UK’s labour market is on ‘in fine shape’, according to official figures, with a renewed surge in jobs
Tej Parikh Chief Economist, the Institute of Directors
Last month’s official labour market statistics show that the employment rate rose to a record high of 76.3% in November.
Fine shape The UK labour market remains in fine shape, with a renewed surge in jobs growth providing uplift for the economy.
Eager Businesses have certainly been eager to recruit over recent years, and higher employment levels have in turn supported household incomes. However, many positions remain unfilled,
and as it becomes harder to find matches for particular roles, firms will increasingly look to close vacancies and tone down their hiring plans.
Wages The other side of the coin, which must be considered, is pay. Wage growth has disappointed in recent
months, but with inflation also weakening, consumers’ spending power should not be overly impacted. In particular, small businesses have been
struggling to raise salaries to attract new staff, and they will be hoping for cost- cutting measures at the March Budget, alongside more investment in the UK’s gummed-up skills system.
40 Implications for the Bank of England’s
Businesses have been eager to recruit over recent years, and higher employment levels have in turn supported household incomes
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monetary policy The recent weakness in the pay data may
provide motivation for the Bank of England to cut interest rates at its next meeting. However, the Bank will also be looking
out for signs of a bounce in economic activity following the election. CCR
February 2020
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