The United Kingdom’s ILO Unemployment Rate has risen to 5.1% in the three months leading up to October, an increase from the previous month’s rate of 5.0%. This increase is in line with market expectations, as analysts had expected an increase to this level. The August labor market report presents a mixed bag of possible outcomes. Employment numbers are dropping, and more people are applying for unemployment benefits.
The announcement on unemployment, released by the Office for National Statistics (ONS), underscores the pain of a transformed UK labor market. September’s Employment Change was downward revised by -22,000 jobs. Preliminary numbers for October show a small gain in the opposite direction, but even that would net out to a decline of 17,000 jobs. These numbers indicate that businesses are still suffering from a skills shortage, hurting their re-hiring capabilities.
Employment Changes and Trends
The new statistics confirm the continuing trend of precarious employment spreading throughout the UK. The troubling employment losses in September and October only underline the continuing economic headwinds that businesses are having to contend with. Today’s jobs drop is less bad at 22,000; however, the rate of decline has slowed to 17,000. Yet, this troubling trend should alarm workers and policymakers alike.
Contrary to these discouraging employment statistics, average earnings have been surprisingly strong. The bottom line average earnings including bonuses jumped up by 4.7% for the year ending in October. That said, this is down a tick from the revised 4.9% growth in the quarter ending last September. A smaller share of people might be working at the moment. Nonetheless, for workers who are employed, they are experiencing high wage growth, above the rate of inflation.
The average earnings growth, excluding bonuses, ticked up to 4.6% year-over-year in October. The small decrease from the prior 4.7% overall shows that wage pressures are very real, especially across the select fields. At the same time, job prospects are still shrinking.
Claimant Count Insights
The Claimant Count Rate for November is already on track to increase by a substantial amount. Projections indicate a jump of at least 22,300 additional claimants. This forecast comes on the heels of the largest increase in jobless claims in history. In November, the level of people filing for benefits rose by 20,100, compared to the revised drop of 3,900 in October.
The increase in new claimants is a stark reminder of the pain so many are still experiencing as they adapt to an unprecedented labor market. In October, the Claimant Count Rate increased to 4.4%. Even as we expect another rise for November, it’s a reflection of how many more Americans are relying on state assistance in this harsh economic reality.
This challenge is made more difficult in context of having the original unemployment rate data come in above what was expected by the market. Analysts had been expecting it to come in at 4.5%. The real surprise was the spike in the reading to 5.1%, indicating deeper troubles in the labor market than anticipated.
Future Projections and Economic Implications
Looking ahead, economists and policymakers alike will need to pay close attention to these labor market dynamics. The rising unemployment rate and increasing claimant counts may necessitate targeted interventions aimed at supporting both job creation and workers facing layoffs.
With average earnings finally beginning to rise positively, there is hope for an improvement in consumer spending as increases in wages exceed inflation on a continued basis. This would be an important boost to the economy, but it’s still vitally important that jobs are created faster than paychecks start rolling in.