Unemployment continues to fall while financial sector leads increases in pay

“The latest labour market statistics indicate continued improvement, with unemployment falling by 58000 to 5.8% over the quarter to November 2014. The number of full-time employees shows a marked increase of 90000, while part-time employees fell in number by 10000. Meanwhile full-time self-employment fell by 35000, though this was almost all offset by an increase in part-time self-employment. Overall the picture is one of a market that is continuing to progress, albeit less rapidly now, towards a restoration of normality.

“Pay has been the focus of much attention in recent months, and, following last month’s encouraging figures, total pay has continued to rise above the rate of price inflation. The latest data indicate that total pay is rising at a rate of 1.7%. The improvement over the last couple of months is largely due to the return of pay hikes in the financial sector – which, on the latest data is showing an annual rate of growth of some 2.6%. In manufacturing, where, over the early part of last year, there were signs of some tightening, the rate of pay increase has declined over recent months and now stands at 1.1%.

“In all regions bar one, the unemployment rate is now 7% or lower. The exception is the North East, where the rate stands at 8.5%. Most regions experienced a fall in the unemployment rate in the most recent quarter, though there was a slight rise in the East of England. Meanwhile, increases in employment levels are observed widely across the country, with particularly large gains in the West Midlands (31000) and London (42000).

“One statistic that is worth monitoring over the coming period is economic inactivity. In some regions in particular – Yorkshire and Humber and London, for example – recent increases in this variable have been pronounced. This may be concealing some less pleasant aspects of the way the market is evolving.

“The overall picture presented by these data is one that indicates movement in the right direction. There are some signs that the recovery is slowing, however – in the industrial production statistics, for example. Furthermore, uncertainty presented by slow progress in the economies of major trading partners and by the possibility of turbulence following elections elsewhere in Europe has to be a source of some concern while the room for manoeuvre for monetary policy remains so limited.”