Commentary on the labour market statistics for May to July 2017

The labour market statistics for May to July 2017, released yesterday, show a substantial increase in employment with unemployment falling. Pay growth, however, may be slowing.

labour market statistics for April to June 2017

The latest labour market statistics show a continued, and substantial, increase in employment. There have been large increases in employees in employment – both full-time (up 96,000 over the quarter to July) and part-time (up 66,000). Correspondingly, the unemployment rate has fallen to 4.3% for the May-July period. Consistent with the rise of the gig economy, numbers in part-time self-employment have also risen markedly – by some 35,000. There have been particularly large gains in accommodation and food services (consistent with the boost to domestic tourism provided by the weak pound) and also in information and communication services. Employment in real estate activities and in professional, scientific and technical services has declined over the quarter.

That said, the main interest in the latest release concerns pay. There have, in recent days, been some indications of strengthening in earnings (from the Markit report on jobs and from the Recruitment and Employment Federation). These bits of evidence are not, however, confirmed by the latest official statistics. The annual rate of growth of total pay in July remained at 2.1% (on the preferred measure), and indeed the (admittedly less reliable) single month measure shows a slowing of pay growth between June and July from 2.8% to 1.4%. Looking ahead, movement in the pay series will need to be monitored closely. But for the time being, these new statistics do not lend support to the idea that the Bank of England should be looking imminently to raise interest rates. Indeed the rapid rise in employment suggests that productivity growth remains hard to come by, and this will continue to put limits on pay growth.