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U.K. employment growth eases in May, jobless rate remains unchanged at 3.8 pct

The latest U.K. jobs report for May released today imply that the labor market is tight and either close to at full employment. Employment continued to rise, while the jobless rate remained at a 44-year low, and measures of pay growth accelerated. Nevertheless, the details of report underline some less positive composition trends, which imply that rising uncertainty in the longer-term outlook might be having a more marked effect on labor market activity, noted Lloyds Bank in a research report.

The rate of employment growth decelerated in the three months to May. Employment rose by 28k, as compared with consensus expectations of a rise of 45k and less than the 32k pace seen in the previous report. However, this did not nudge the jobless rate higher, which remained at 3.8 percent.

The growth in employment was mainly driven by the 123,000 rise in self-employment, while the number of employed workers dropped 85,000 in the three months to May. Furthermore, while surveys of hiring intentions have rebounded from the lows recorded earlier in 2019, they imply that the rate of employment growth is expected to be slower than seen in the previous years, said Lloyds Bank.

Composition shifts in the make up of the labor force signified that the number of people working full time dropped 58k and the number of people working part time rose 87k. Therefore, the number of weekly hours worked throughout the economy dropped 0.5 percent in the three-months to May underpinning the view that the rate of GDP growth eased in the second quarter.

The latest job vacancies data indicated that the number of positions for which employers were actively seeking to recruit from outside their business slowed further in the latest report, to 827k. This still implies that there is pent up demand for labor, stated Lloyds Bank.

Meanwhile, the pace of regular pay growth accelerated slightly to 3.6 percent on a three-month –year basis from 3.4 percent, while the rate of total pay also rose to 3.4 percent from 3.2 percent previously.

“Taken together, an environment where output per hour worked is relatively stagnant (productivity), while firms are having to pay more, means that unit labour costs (the cost of producing a unit of output) is likely to continue rising. It is this dynamic that leads us to expect that domestically generated inflation pressures will continue to build in the coming quarters”, added Lloyds Bank.

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