Jobs market continues to prop up UK economy

The latest official labour market statistics, published earlier today by the Office for National Statistics (ONS), show that the UK jobs market continues to be in good health. It has shown another rise in the number of people in employment and only a modest increase in both the number of people unemployed and the economically inactive. The number of job vacancies has dropped by around five per cent in the previous quarter, but the overall job vacancy landscape remains positive by historical standards.

Pay pressures also remain subdued in spite of recent hikes in the rate of inflation. The measures for calculating average earnings show a slight fall compared with the previous month.

Gerwyn Davies, Public Policy Adviser at the Chartered Institute of Personnel and Development (CIPD) comments, ìYet again, the jobs figures continue to defy the woes experienced by the rest of the economy, which will provide some comfort to the Government and reassure the Bank of England that pay rises still pose little threat to inflation. While there has been an increase in the claimant count, the numbers classified as economically inactive have risen less fast, and the number in employment has continued to rise.î

Davies continues, ìHowever, despite the apparent resilience of the labour market, a loud note of caution should be sounded given that these figures do not include the swathe of redundancies that have been announced in the past month or so. And with a number of employers poised to pull the redundancy trigger in the next six months, the Government will be hoping for some better economic news as the year progresses.

One reason that employment remains high is the ongoing struggle employers have to attract and retain talent. This is discouraging employers from rushing to make redundancies. But each further knock to confidence in the economy risks triggering an avalanche of job losses. We hope that the labour market can cling on ñ but the next few months could be a white knuckle ride.

Curbing pay rises is one of the obvious ways in which organisations can minimise redundancies, so it is encouraging to see that pay restraint is being shown.

However, if such restraint is not shown, particularly in the event of a possible interest rate rise, the risk of an avalanche of job losses becomes even greater.î

Davies concludes, ìIt requires a leap of imagination to compare this situation with the previous downturns when unemployment was measured in millions and pay levels rocketed.î