After Friday’s strong numbers for UK economic growth or GDP the question for today is/was will it be backed up by the labour market. We can start positively on that front.
There were 184,000 more people in payrolled employment in December 2021 when compared with November 2021.
So strong growth which brings hopes that the November economic growth momentum rolled into December. This continues what has been a strong period for payrolled employment.
Early estimates for December 2021 indicate that the number of payrolled employees rose by 4.8% compared with December 2020, a rise of 1,340,000 employees; the number of payrolled employees was up by 1.4% since February 2020, a rise of 409,000.
However we need to be cautious about the precise numbers as November was revised lower.
UK payrolled employee growth for November 2021 compared with October 2021 has been revised from an increase of 257,000 reported in the last bulletin to an increase of 162,000; this revision is a result of incorporating additional real time information (RTI) submissions into the statistics, reducing the need for imputation – which takes place every publication; as early estimates have a higher level of imputation, revisions of this scale are within expectation.
The use of the word imputation always makes me nervous after the way imputed rents are used to miss measure housing inflation. But more fundamentally a revision of just under a hundred thousand is seen as normal.
The detail also looks at an area that in my experience hit trouble over the Christmas and New Year break.
The increase in payrolled employees between December 2020 and December 2021 was largest in the accommodation and food service activities sector (a rise of 312,000 employees) and smallest in the transportation and storage sector (a fall of 2,000).
My instagram feed on here has pictures of the 2 pubs in my locale which have closed and another shut before Christmas saying it could not get staff. But as it has yet to re-open I fear it too has bitten the dust.
The numbers above are backed up by the strength we have seen in vacancies as the Covid pandemic has developed.
The number of job vacancies in October to December 2021 rose to a new record of 1,247,000, an increase of 462,000 from the pre-coronavirus (COVID-19) pandemic level in January to March 2020.
Although the growth is now fading.
The quarterly rate of vacancy growth fell to 11.4% in October to December 2021, down from 29.7% last quarter, and follows consecutive falls from a peak of 43.4% in May to July 2021.
This too was positive as it fell further.
The unemployment rate decreased by 0.4 percentage points on the quarter to 4.1%, while the economic inactivity rate increased by 0.2 percentage points to 21.3%.
There is a concern that some may have simply shifted to the inactive category but after the economic shock seen these are extraordinary unemployment numbers. Back in the day for example an unemployment rate of 4.5% was considered as a type of “full employment”. Also remember when Bank of England Governor Mark Carney set an unemployment rate of 6.5% as an indicator for raising interest-rates before morphing into an unreliable boyfriend?
This is the first hiccup in the quantity numbers and it is disappointing that the official release tries to hide it away. The number of self-employed has fallen by around 800,000 over the course of the pandemic from a level of just over 5 million. So the trumpeted payroll gains above are in part a switch rather than an outright gain.
I think that we also get something of a clue here to the impressive unemployment rate above. Yes there have been gains but there have also been ch-ch-changes as David Bowie would put it. This means that a particular unemployment rate is not as good a signal as it used to be.
Here is a situation which we have been using as a signal due to the metrics above being distorted by the various furlough schemes.
Total actual weekly hours worked decreased by 2.6 million hours compared with the previous three-month period, to 1.02 billion hours in September to November 2021.. It is still 33.5 million below pre-coronavirus levels (December 2019 to February 2020).
As you can see it has not responded to the improved economic situation shown by the GDP numbers. It is hard to square with the increased number of payrolled employees as hours per person have dropped.On the upside if we look at the GDP numbers it does suggest a productivity improvement.
The situation here does pose some questions. At least we finally seem to be escaping the problems created by the pandemic which distorted the numbers themselves.
The rate of annual pay growth for total pay was 4.2%, and the annual pay growth for regular pay was 3.8% in September to November 2021. Previous months’ strong growth rates were affected upwards by base and compositional effects. These temporary factors have largely worked their way out of the latest growth rates, but a small amount of base effect for certain sectors may still be present.
But the numbers themselves start to look rather thin as we consider the background of ever higher inflation numbers.
In real terms (adjusted for inflation), total pay and regular pay for September to November 2021 are showing minimal growth at 0.4% and 0.0%, respectively.
Even the official series is hinting at the problem and it under measures inflation via its use of imputed rents.Also we know that inflation was rising during this period meaning things were worse in November.
Single-month growth in real average weekly earnings for November 2021 fell on the year for the first time since July 2020, at negative 0.9% for total pay and negative 1.0% for regular pay.
Actually we can add to that as wage growth is slowing and was 3.5% over the year to November for total pay. We know that the Retail Price Index or RPI rose by 7.1% or just over double that rate. Thus using it real wages fell by 3.6% which has hints already of the 2010 fall in real wages which was also caused by an inflation surge and from which we have never really recovered.
We can give some ground and trim some of the RPI due to the disputed parts but that still leaves us with wages falling at an annual rate of 3%. Just in time for 2022 to have a cost of living squeeze.
The actual wages numbers are below.
Average weekly earnings were estimated at £588 for total pay, and £550 for regular pay in November 2021.
There are strong elements to the UK labour market numbers which revolve around payrolled employment, unemployment and vacancies. These fit with the strong GDP numbers from last Friday. But then the picture gets more complex as we factor in the decline of self-employment. This is hard to put in accurately as we have long noted they were probably working fewer hours but there has been a shift here. Next comes the slightly curious dip in hours worked which will need careful monitoring. As the numbers are unlikely to have much information on the self-employed at this stage we have more (payrolled) employees working less? This is curious and maybe the numbers are under pressure from the switch from office to home working for so many.
The numbers which are really worrying are the real wages ones. The average earnings numbers themselves show signs of singing along with Queen and David Bowie.
Pressure pressure pressure pressure pressure
Pressure pressure pressure pressure pressure
Pushing down on me
Pressing down on you
Then we need to factor in rising inflation as well which is set to get worse as we move into the spring. Will we see another repeat of the falls we saw in 2010 and 11?