It's been a long time coming, but today's labour market statistics (PDF) finally showed signs of a marked weakening in the UK job market. The latest monthly data was soft across the board: employment levels and the working age employment rate both fell, growth in average earnings moderated, job vacancies fell, and the claimant count (jobless claims) rose for their eleventh consecutive month. The unemployment rate jumped to 5.0%, from 4.6% last quarter, and is now at its highest rate for over two years. However the economic inactivity rate was steady, and industrial disputes remained near record lows.
The British economy has been experiencing sub-trend growth for some time, so a weaker labour market was only a matter of time. But just how bad are the numbers? An optimist would point to the fact that the claimant count rate - which is one month more up-to-date than the unemployment rate - has remained steady at 2.9% for the past three months, and that the number of redundancies has fallen.
A pessimist would see today's data as the portent of worse to come, pointing to the sharp rise in unemployment and the slump in job vacancies. Job openings in the hotels and restaurants sector and in the public sector suffered a particularly sharp decline, according to the ONS.
While I expect further softening in the UK labour market data over the next six months or so, the monthly unemployment numbers should edge rather than spike higher. This does not feel like a recession, or anything close to it. Nonetheless, weak job and wages data - coupled with yesterday's fall in CPI annual inflation to 2.0% - should encourage the Bank of England's MPC to announce their next rate cut quite soon.
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