The ILO unemployment rate was unchanged at 8.3% in October, in line with our and the consensus forecast. The number of jobless increased by 128k in the three months to October reaching 2.64m, the highest number of unemployed since 1994.

The unemployment rate for people aged between 16 and 24 increased to 22% over the quarter with the total number of unemployed in this age group reaching 1.03m - the highest since records began in 1992. November claimant count unemployment, on the other hand, increased less than expected by 3.0k (consensus: 13.7k, BarCap: 10.8k) and the previous month's estimate was revised down to 2.5k. In recent months we have observed slower growth in the claimant count (see chart) and considering this measure has historically led the ILO unemployment measure, we might expect to see a similar trend emerge in the latter. However, the current economic environment has increased the uncertainty around such an outcome.
 
The sectoral labour market data for September were also released today and showed that public sector job losses continued to outpace private sector job creation. The number of people employed in the public sector fell by 67k during Q3, while employment in the private sector increased by only 5k for the same period. Local government employment was particularly weak, falling by 59k, with other parts of government reporting smaller falls. The annual data paint a more encouraging picture as public sector employment fell by 276k compared with Q3 10 versus an increase of 262k in private sector employment over the same period. However, we would point out that the recent slowdown in private sector job creation is consistent with the worsening economic conditions and considering that we expect growth to be subdued throughout next year weak employment growth in the private sector seems increasingly likely.
 
Earnings growth remained subdued. Average weekly earnings growth was in line with consensus, falling to 2.0% 3m/y from 2.3% previously (BarCap: 2.2%), with both private and public sector pay growth slowing. Core earnings growth was slightly above expectations at 1.8% from 1.7% previously (consensus/BarCap: 1.7%), but nevertheless consistent with subdued earnings growth.
 
There are two main themes emerging from today's data release. Firstly, earnings growth remains subdued and, with inflation still elevated, the squeeze on real income has intensified further. In fact real earnings growth, which adjusts for tax and price inflation, has been negative for 19 consecutive months (see Chart 2). Secondly, the number of unemployed continued to increase as private sector employment growth has not been sufficient to offset the sharp fall in public sector employment, especially since the summer. With the weakening in the economic outlook and further government spending cuts to come we expect UK labour market conditions to deteriorate further during 2012.
 

source: BarCap