Turning points for the labour market

It usually takes some time for turning points in the broader economic cycle to show through in the labour market numbers - in econ-speak, we talk of unemployment being a lagging indicator of the rest of the economy. Job losses make the headlines but new jobs created rarely filter into the news. But such is the nature of our flexible labour market that the jobs data looks likely to start moving in the wrong direction with greater haste than in previous downturns. Just listening to the banter in my local gym, I have picked up that many of the small to medium sized businesses in my area are battening down the hatches and looking to cut their overheads - if businesses want to survive they have little choice.

This week’s labour market statistics hint at a change in direction for unemployment.

The number of people claiming unemployment benefit increased by 15,500 to 840,100 - is the biggest since December 1992.
The broader labour force survey measure rose 12,000 between March and May to 1.62 million.
The number of vacancies in the economy fell by 32,200 over the quarter, the biggest drop since December 2001
The number of redundancies also rose by 10,000 to 118,000 in the three months to May, the highest level since late last year

The Prime Minister ignored all of this and (with his Chancellor sat smirking in the background) chose to focus instead on the record level of employment. We are in that gray area where the economy is still creating (just) sufficient extra jobs for the overall level of employment to rise. And the labour force survey evidence also shows a rise in the total number of hours worked.

But such are the cost pressures facing businesses across the economy that hours and paid jobs will start to decline soon - and that will confirm that this is no mild slowdown.