The latest labour market data from the Office for National Statistics (ONS) show that the shine is finally coming off the UK labour market in line with our expectations. Employment failed to rise; in fact, it fell by a marginal 2,000 in the three months to February. Full-time employment rose by 60,000 but was offset by a 62,000 decline in part-time working. The number of people working part-time because full-time opportunities were not available rose by 21,000. Unemployment rose by a significant 70,000 as the unemployment rate crept up to 7.9%.
Annual total earnings growth decelerated further to 0.8% in February, well below annual inflation of 2.8%. Regular pay growth (which excludes bonuses) was also subdued at 1%.
The April labour market release contains information on q4 workforce jobs. Workforce jobs growth was flat in 2012q2, consistent with a weak outturn for the economy. Growth was robust in the first quarter of 2012 when 440,000 jobs were added to the economy. Since then, the economy only lost 35,000 net jobs in the rest of the year.
Measures of productivity (measured as output per job) are equally discouraging. Manufacturing productivity was down by 5.2% on the year in 2012q4 while services saw a 1.2% dip in annual productivity. On the whole, the overall economy was 1.8% less productive at the end of 2012 than it was at the start of that period.
These statistics reflect a widely anticipated slowing in labour market conditions, bringing employment trends more in line with flat output. Productivity has fallen, pay growth has decelerated to a near-standstill unemployment has risen and job creation has halted. We expect a further few months of labour market weakness before better economic conditions herald some recovery towards the end of the year. This view is still subject to downside risks, particularly linked to the prospects of the eurozone in the next few quarters.