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Economy in Brief

Employment Rises Sharply in UK, Unemployment Down
by By  Carol Stone July 18, 2007

In a marked shift, UK employment surged 63,000 in the 3 months centered on April, a second successive gain, as the March period saw 31,000 more employed. From three months ago (the style of comparison that the UK's Office for National Statistics [ONS] generally emphasizes) the latest figure was 93,000 higher. Notable as well, full-time employment gained 117,000 from 3 months back, while part-time work decreased 25,000.

Unemployment, measured by the ILO definition, is down 34,000 from 3 months ago, a 2% decline. The unemployment rate consequently dipped to 5.4% from the 5.5% that has prevailed most of the last year. The more widely followed unemployment gauge in the UK, the "claimant count rate", is showing further declines: a single monthly figure, it stood at 2.7% in May and June, the lowest since September 2005 and down from a recent peak of 3.0% last October. The number of claimants in June was 864,100, down almost 10% from their peak of 956,700 last September.

We last considered these data two months ago, and we noted then that job vacancies had risen, suggesting that the employment environment might do better, as it in fact has. At that time, vacancies were up 20,000 from 3 months previous, reaching 647,400 in April. This figure has been revised down slightly to 644,100, and in May and June vacancies increased another 6,000 to 650,100. The recent gains, albeit small, were in transportation and communications, and finance and business services.

So we are enthusiastic about the employment increase in the UK, believing it is a sign of economic health. Press reports, however, highlight the push some economists and journalists think it portends for inflation and interest rates. This may eventually occur, although accompanying wage data indicate that cost pressures remain moderate. The key average earnings index had a 3.5% "headline rate" for the 3 months ended May, down from 3.6% excluding bonuses in February and 4.6% including bonuses. It may be, then, that causation is running the other way: perhaps because wages remain moderate, businesses have increased their hiring.

UK Labor Force Survey & Related Labor Data Jun 2007 May 2007 Apr 2007 Mar 2007 Year Ago 2006 2005 2004
Employment*
 
(3Mo Avg, SA, Thous)
-- -- 29075 29012 28,895 28,960 28,730 28,465
Chg from 1 & 3 Months Ago -- -- 63/93 31/-10 +15 (MoAvg)0.6% y/y 0.8% 0.9% 1.0%
Unemployment Rate*  (3Mo Avg, SA, %) -- -- 5.4% 5.5% 5.4% 5.4% 4.8% 4.8%
Claimant Count  
(Monthly, Thous)
864.1 877.9 889.7 905.7 947.1 944.7 861.7 853.3
Claimant Count Rate (SA, %) 2.8 2.9 2.9 2.9 3.0 3.0 2.7 2.7
Vacancies
(Monthly, Thous)
650.1 631.8 644.1 643.7 593.7 594.6 617.0 629.0
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