Has Britain’s jobs market bounced back?

The jobs market has turned a corner. Vacancies have fallen again to 934,000, down 49,000 in the last three months of the year, the longest continuous fall on record. Wage growth slowed to 6.5 per cent in cash terms – which will please the Bank of England – but luckily for workers inflation is falling faster, meaning those rises translate into real terms pay bumps (of about 1.3 per cent). Employment climbed slightly while unemployment remained flat. 

The next inflation figures are out tomorrow but the wage data are a sure sign of the direction of travel. Take out bonuses and average pay rose 6.6 per cent (1.4 in real terms). Hotels and restaurants saw the largest growth in pay excluding bonuses at 7.2 per cent. Economists now expect Consumer Price Inflation (CPI) to fall below the 2 per cent target within months – far quicker than current Bank of England forecasts.

November (the last month of figures) showed the fewest days lost to strikes for 18 months, something that should boost economic figures yet to be released. But given the length of the junior doctors strike which started the year there’s no expectation the trend will continue.

Meanwhile, vacancies fell for the 18th consecutive period and by 5 per cent since the summer. Jobs on offer fell in 12 out of 18 sectors monitored by the Office for National Statistics (ONS). The largest falls were in the retail and transport sectors. Despite this, the pandemic's effect on the jobs market is still keenly felt: total vacancies remain 133,000 above pre-lockdown levels.

So while there is good news for rate setters there’s still concern at the quality of the data produced by the ONS. Last autumn, statisticians halted publication of much of the key labour market data because the survey which underpins it had falling response rates. Those who did respond tended to be older and more likely to be retired, skewing the results.

While the ONS have managed to get the headline figures for employment and inactivity back on track we will have to wait until their ‘transformed’ survey is published in the spring for much of the important detail, such as those out of work due to long term sickness. This is a crucial figure when the benefits caseload gains 920 new sick people every single day. Until the statisticians sort that out, it’s all pretty much guess work.