UK unemployment, wage growth and inflation figures

The search for the peak in inflation goes on, while workers continue to hope (and strike) for pay increases which protect the purchasing power of their cash. Central bankers will also be on the alert, as they clearly fear a 1970s-style wage spiral but will also be wary of any turn in the jobs market. Job vacancies are starting to shrink (on both sides of the Atlantic), although the number of free slots is still elevated and plays to the argument that any imminent recession will be a shallow one, as vacancies will disappear and obviate the need for job cuts.

Source: Office for National Statistics

The Office for National Statistics will release the jobs and wage data for the three months to October on Tuesday 13. For the three months to September, the headlines were as follows:

• The unemployment rate was 3.6%, still very low by historic standards
• The employment rate was 75.5%, still near all-time highs
• Job vacancies stood at 1.22 million, exactly the same as the jobless total of 1.22 million, but slightly down from May’s peak of 1.3 million
• The total claimant count was 1.5 million, perhaps a more accurate picture of the number of households who need external help and are struggling to makes ends meet
• Wage growth was 6% year-on-year including bonuses and 5.7% on a regular pay basis.

That pay growth figure offers some grounds for encouragement for workers, but it still lagged inflation.

Source: Office for National Statistics

In September:

• The consumer price index rose 10.1% (and then reached 11.1% in October)
• The CPIH index, which includes housing costs, rose 8.8% (and reached 9.6% in October)
• The retail price index, no longer an officially recognised statistic, rose 12.6% in September and then surged again to 14.2% in October. This dataset has the longest history (back to 1947, rather than 1989 in the case of CPI) and it shows that the last time inflation was this high, in December 1980, the base rate stood at 14%, not 3% as it does now. The Bank of England is therefore still, to all intents and purposes, running very loose monetary policy, although a peak in inflation would perhaps take off some of the pressure.

Source: Bank of England, Office for National Statistics

This degree of inflation meant that workers were still worse off in real terms, despite that 6% average pay rise. This is why the Bank of England is having to try and fight inflation while at the same time avoiding tipping an indebted economy into recession by imposing monetary policy that is too tight.

This balancing act can perhaps best be seen from the perspective of the Misery Index, as devised by the economist Arthur Okun. This adds together the prevailing rate of inflation and the prevailing rate of unemployment. In September, 12.6% inflation and 3.6% unemployment made for a reading of 16.2, the highest since March 1991.

Source: ONS Data. Used RPI inflation for longer dataset, as CPI was only introduced in 1997