UK: Sense of a moderation in job creation - RBS

Ross Walker, Research Analyst at RBS, notes that the UK’s total (ILO) employment rose 55k, 0.2%, in the three months to April – a superficially trend-like outturn.

Key Quotes

“However, the detail of the employment data was rather less robust, with over three-quarters of the new jobs accounted for by self-employment. The more important ‘full-time employee jobs’ measure reported a rise of just 5k in the latest quarter. In a similar vein, the fall in the unemployment rate was partly a reflection of a further rise in inactivity (people leaving the labour market). Reinforcing the softer employment theme was a further decline in average hours worked (-0.2% q/q).

Survey evidence reinforces the sense of a moderation in job creation. Thus far (data to April) this has been a case of a slower pace of job gains rather than an outright contraction in employment. However, the ‘Leave’ outturn in the EU referendum is likely to prove a turning point, with sub-trend GDP growth in H2 2016 resulting in rising unemployment by around the turn of the year.

For now, we expect pre-referendum Brexit risks to weigh modestly on the underlying pace of job creation. We forecast employment to rise 75k in the three months to May, lowering unemployment by 30k and leaving the unemployment rate unchanged at 5.0%. On the claimant count, we forecast a 2.0k rise in June, leaving the unemployment rate at 2.2%.”