The latest official labour market statistics, published earlier today by the Office for National Statistics (ONS), show a substantial fall in the rate of growth in employment compared with recent quarters and a further rise in unemployment on both the Labour Force Survey and claimant count measures. However, employers are still hiring and there is no sign yet of a rise in redundancies which indicates that the labour market overall is cooling only moderately. This, along with a slight pick-up in the rate of growth of regular pay (earnings excluding bonuses), means that the latest rise in unemployment does not strengthen the case for a cut in official Bank rate says John Philpott, Chief Economist at the Chartered Institute of Personnel and Development (CIPD).
Dr Philpott commented as follows:
ìThe jobs market overall remains relatively buoyant but signs of the impact of the credit crunch are beginning to emerge. Employers are still hiring and there is still no sign of a widespread increase in the firing rate. However, the rate of growth in employment is much slower than in recent quarters and some sectors are showing obvious signs of strain. Combined with continued strong growth in the number of people entering the labour market the economy is now generating too few jobs to prevent the dole queue from starting to lengthen.
ìThe finance and business services sector remains in the eye of the storm, shedding 20,000 jobs in the first quarter, and is now easily outstripping manufacturing as the principal sector experiencing job cuts. But shops, hotels and restaurants are suffering too and are now in a period of jobs standstill. And public sector employment, which staged a brief statistical rally following the switch of Northern Rock employees into the state workforce, is now falling again.
ìFor the time being, however, it looks as though contract staff ñ the self-employed and temporary workers ñ are bearing the brunt of the jobs slowdown. Although in current conditions contract staff are more likely to be hired by employers cautious about future demand prospects, contract staff are also those easiest to let go if need be.
ìThe fact that reduced hiring rather than increased firing of core permanent staff is the cause of the jobs slowdown means that claimant unemployment is rising because fewer people are leaving the jobless count rather than more joining it. This might be welcome news insofar as it suggests that the labour market maintains a degree of positive momentum though it is bad news for the Government in its efforts to move more claimants off the welfare roll and into jobs.
ìAll in all, while some might argue that signs of slower growth in jobs and rising unemployment strengthen the case for a cut in official Bank rate, the latest labour market figures remain strong enough to suggest otherwise, especially given a slight rise in the rate of growth in regular pay (i.e. excluding bonuses). Indeed, with inflation set to rise further above target in the near term, the probability has increased that Bank rate may have to increase. Though perhaps necessary, this would serve to exacerbate the jobs slowdown and increase the risk of big rise in unemployment. If so todayís jobs figures may be amongst the best we see for some time to come.î
Firing activity remains subdued as dip in employment growth drives up jobless rate
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