Labour market gains ease but earnings growth accelerates

In line with Experian’s expectations, today’s figures from the Office for National Statistics (ONS) show growth in most labour market metrics eased from the strong rates reported last month. Earnings growth was a key exception.

The key points comparing the three months to January 2016 with the three months to October 2015 are:
• Employment rose by 116,000. The number of employees was up 76,000, accompanied by a rise of 25,000 in self-employment
• The number of full-time employees was up 33,000
• The unemployment rate fell to 5.1%
• Comparing the three months to January 2016 with a year earlier, pay for employees in Great Britain increased by 2.1% including bonuses and by 2.2% excluding bonuses.

As expected, the latest data show that growth in the labour market remains robust, albeit easing. Gains in total employment and the number of employees were the smallest since the three months to July 2015. The gain in self-employment was the smallest it has been since the three months to June.

Despite the general slowdown in the labour market, growth in total earnings in the year to November 2015 – January 2016 accelerated to 2.1%. However this remains well below the summer peak where total earnings grew by 3.3%; and the question mark over the UK’s productivity performance remains.

In the coming months we expect the labour market to grow at a steadier rate than those registered at the back end of last year. The weakening global outlook and risks surrounding a potential ‘Brexit’ are likely to limit growth and we have downgraded our forecast for consumer spending in 2016 to 2.4%, and now expect GDP for 2016 to be below 2%.