UK unemployment down, earnings up

November saw a sharp drop in unemployment, with claimants down by 6,300. It suggests a return to growth in the fourth quarter and is the first fall since February 2008.

The cebr said it is well below both the downwardly revised 5,900 rise seen in October and the consensus expectation of a 13,300 increase. Claimant count unemployment reached 1.626m in November from 1.633m in October. In line with expectations, the rate of unemployment remained steady at 7.9% over the three months to October.

The internationally comparable measure of unemployment now stands at 2.49m, said Owen James, cebr economist.

Average earnings, including bonuses increased by 1.5% in the three months to October 2009 compared with 2008, “higher than the consensus expectation of 1.2%” said Owen, “but average earnings excluding bonuses rose by 1.7% over the same period, slightly lower than expectations”.

The split between public and private sector wages, excluding bonuses, is particularly stark with the annual growth rate for the last being 1.4% while the public sector is almost twice that at 2.7%.

“Public sector workers are certain to feel a similar squeeze on earnings growth over the next three years,” said Owen.

He added: “Today’s labour market statistics reveal two important themes. Firstly, average earnings growth, both including and excluding bonuses, continues to remain sluggish. This shows that firms are using the price, as opposed to the quantity of labour, to reduce costs.

Second, the fall in the claimant count, typically a lagging indicator, suggests that the recovery has been underway for some months. This supports our view that the UK economy is likely to see strong growth in the fourth quarter. However, a weak first quarter of 2010 also looks likely as the rise in VAT, along with a stuttering global recovery, provide a rapid reminder that the recovery is unlikely to be smooth or rapid.”