Yesterday’s labour market figures from the Office for National Statistics (ONS) confirm Experian’s predictions that labour market conditions remain generally strong.
A quarterly increase in total employment of 177,000, a decline of over 100,000 in unemployment and substantial fall in the number working part-time, because they were unable to find full-time work, are all good news for the overall economy. The unemployment rate is now 5.3% – the lowest level since 2008 Q2. The strength of the figures is all the more encouraging given that the recovery is now well into its third year.
Continuing robust gains in employment and pay growth surpassing inflation by a wide margin will further strengthen household budgets in the months ahead. Though earnings growth (on the excluding bonuses measure) eased in the past three months, we expect wage growth to remain well above the extremely benign rate of inflation. All this underpins our forecast of a strong increase in real disposable incomes this year of 3.3%. This will continue to boost consumer spending growth which at a forecast 3% this year will drive overall economic expansion at a healthy rate of 2.5%, despite weak government spending and exports. Looking further ahead, we expect conditions for consumers to remain favourable in 2016, though less so than this year as inflation picks up and welfare benefits are hit by austerity measures. We expect consumer spending to increase by 2.3% with GDP growing at a similar pace.