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U.K. labor market remains tight at end of 2019, jobless rate stays unchanged at 3.8 pct
U.K. labor market report came in strong at the end of 2019. The latest jobs report shows that the labor market remains tight and either close to or at full employment. In spite of uncertainties over the longer-term outlook for the U.K. economy, employment in the three months to December rose 180,000, surpassing market expectations. Such a pace of job creation was enough to deliver further declines in unemployment, keeping the jobless rate at a 45-year low of 3.8 percent.
The report contrasts slightly with the more-sober assessment of domestic activity trends made by the recent fourth quarter GDP report. Nevertheless, with uncertainty regarding the outlook elevated economic data are expected to stay volatile for some time still, masking trends in the underlying economy. However, headcount continuing to rise potentially gives a more insightful gauge on future prospects, especially if underpinned by expectations of stronger demand for goods and services in the future.
Delving into details, employment rose 180,000, out of which, the rise came entirely from a 203,000 rise in full-time employment, while the number of part-time workers dropped 23,000 in the three months to December. Furthermore, surveys of hiring intentions have recovered from the lows seen late last year, indicating towards the likelihood that the labor market will stay strong in 2020.
This view is underpinned by the latest read on job vacancies, which indicated that the number of positions for which employers were actively seeking to recruit from outside their business moved back up in January, after some moderation in the second half of 2019, implying that demand for labor has firmed at the beginning of 2020. Moreover, for each vacancy, on average there were 1.6 unemployed people for employers to choose from.
The overall pace of pay growth decelerated. Annual regular pay growth slowed to 2.9 percent from 3.2 percent, while total pay eased to 3.2 percent from 3.4 percent.
“Still, an environment where the amount of output being produced for each hour worked remains low, while firms are having to pay more, means that unit labour costs – the cost of producing a unit of output – are rising. It is this dynamic that leads us to expect that domestically generated inflation pressures will continue to build. Overall, this latest news is a reminder that even current levels of pay growth – in a tight labour market – are inconsistent with market expectations of a lower level of Bank Rate”, said Lloyds Bank in a research report.