| UK unemployment increases to 8.3% as labour market deterioration gathers pace |
| 16.11.11 12:13 | |
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The signs of distress in the UK labour market have intensified, with the ILO unemployment rate increasing to 8.3% in the three months to September, up from 8.1% in August and ahead of our and the consensus forecast of 8.2%. The number of unemployed people increased by 129k q/q, the largest quarterly increase since the depths of the recession in 2009. More than half of the increase was among 16-24 year olds, where an additional 67k were unemployed in Q3 compared with Q2. Youth unemployment now stands at 1.02mn. Claimant count unemployment for October also increased, although the 5.3k addition to the benefit rolls was lower than our forecast of 16.5k (consensus 21.0k) and September's increase was revised downwards. With the employment outlook continuing to sour, wage pressures remained subdued. Average weekly earnings grew by 2.3% 3m/y in September, below our forecast of 2.6% (consensus 2.5%) and down from 2.7% growth in August. Core earnings grew by 1.7% 3m/y, slightly above expectations (BarCap and consensus 1.6%) but weaker than the 1.8% growth seen in August. The increase in youth unemployment above the politically resonant 1mn mark is likely to garner the headlines, but today's data include some other notable features. The first is a distinct degree of regional variation in the extent of the unemployment increase, with the regions that saw the largest increase in unemployment heavily dependent on public sector employment. For instance, the unemployment rate in the North East of England increased to 11.6% in Q3 from 10.0% in Q2, and that in Yorkshire and Humberside rose to 10.3% from 8.5%. While the pattern was not universal (Northern Ireland, for instance, saw the unemployment rate remain flat), the general picture of areas with high shares of public sector employment seeing the biggest up-tick in unemployment suggests to us that public sector job cuts play a significant role in explaining the recent climb in the unemployment rate. As the public sector has a disproportionately female workforce, this interpretation is also consistent with recent increases in the female unemployment rate, which is now at its highest level since 1994. Quarterly data on public sector employment for Q3 will be released next month. Finally, the moderating in nominal pay growth means that the squeeze in real incomes (at least up to September) has intensified. The decline in annual inflation seen in October - probably the first of many such declines over the next year or so - should see the real income squeeze moderate. However, real income growth is affected by nominal income developments as well as the evolution of prices. Should pay growth fail to pick up as we expect, perhaps because the labour market deteriorates more than we currently forecast, then the squeeze on real incomes is likely to be deeper and more prolonged. source: BarCap |
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