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New labour market statistics suggest that economic growth is slowing down

Increase in annual earnings growth to 2.1% unlikely to be driven by skill shortages

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Commenting on today’s ONS Labour Market Statistics, Mark Beatson, Chief Economist at the CIPD, the professional body for HR and people development, says: “Today’s figures point to an easing of labour market activity at the end of 2015.  Although employment growth remains strong by historical standards, the rate of growth is a little less than earlier in the year, and there has been a more noticeable impact on unemployment, where the three-month reduction of 27,000 is the smallest since the short-lived increases in unemployment we saw last spring.

“In contrast, there has been a small upwards movement in average earnings growth, from 1.9% to 2.1%.  This does not appear to be driven by skill shortages, as the UKCES Employer Skills Survey showed that 23% of vacancies in 2015 proved hard to fill because of skill shortages, a proportion hardly changed since 2013 (22%). Wage growth of 7.2% in construction accounts for part of the overall increase, but the weather may be a factor here because the ONS measure is affected by changes in average hours worked and changes in workforce composition.

“The end of 2015 saw a slight cooling in economic activity and increased nervousness about the health of the global economy, and this has had an impact on the labour market.  The new economic forecast that will be unveiled in Budget later today is expected to include small downwards adjustments to the economic growth forecasts produced with the Autumn Statement.  While the Chancellor will need to keep an eye on the labour market and progress towards his ambition of full employment, low productivity growth remains the most pressing economic problem facing the government.”