LONDON (Reuters) - The number of people claiming jobless benefit fell by slightly more than expected last month, while the number of people in employment rose by its most in almost 4 years, helped by a record rise in part-time work, official data showed on Wednesday.
“The ILO data are belatedly on an improving trend, consistent with the expansion in the economy during Q1 and the likelihood of an even faster pace of expansion during Q2.
“However, we would caution against extrapolating this trend. The upstream survey indicators suggest that the pace of GDP growth will begin to decelerate from Q3 onwards, which in turn points to a loss of momentum in labour market indicators.
“Wage inflation slowed by slightly more than expected, down to 2.7% 3m/yr from 4.1% the prior month. That was largely due to the spike in bonus-related payments dropping out of the calculation. Ex-bonus wage inflation remained particularly subdued, slowing to 1.8% 3m/yr from 1.9% previously. The balance of supply of available workers vs. still fragile demand for workers suggests this situation is likely to persist for some time to come, not least once the redundancies in the public sector begin to come through.
“Overall, an encouraging labour report on the jobs front, which it should be at this stage of the cycle. Even so, the wage inflation that some MPC members may be concerned about simply isn’t showing up.”
“While the latest labour market data is broadly encouraging, we have significant concerns about the jobs outlook.
“Unemployment may very well continue to fall in the near term, but there is a very real danger that it will start to head back up later this year and then increase in 2011.”
“Major job losses are on the way in the public sector as the government slashes spending, and we doubt that the private sector will be able to fully compensate for this. Indeed, it may well be that the private sector becomes increasingly cautious in their employment plans due to concerns that the intensified fiscal squeeze will hold back growth.”
“It still seems unlikely that wage pressures will pose an inflationary threat anytime soon, which supports the case for the Bank of England to keep interest rates down at 0.5 percent for many months to come.”
“The UK labour market has perked up a bit, but we still doubt that private sector hiring will pick up strongly enough to offset the severe public sector job cuts.”
“However, the rise in employment was driven by self-employed and part-time workers, suggesting that employers are still nervous about the outlook.”
“What’s more, the high rate of unemployment seems to be putting renewed downward pressure on pay growth.”
“We still think that household incomes face a severe squeeze from the looming public sector job cuts, tax rises and weak pay growth.”
“The important element of the figure was the average earnings part. If you take into account the disappointing inflation data, the market was a bit on edge that we might get a bad average earnings report and further fuel the hawkish element of the BoE.
“The fact that it came in below forecast should be supportive of the BoE staying on hold for an extended period of time.”
“Even though it’s good news to see improved labour market data ... we should expect unemployment to start ticking up again. We’re navigating in difficult waters as we don’t know full details of the spending cuts.
“Towards the end of this year or early next we should start see the first impact, but the more important impact won’t be until 2011.”
“The really encouraging thing is the pick-up in employment. It just goes to show that there is improvement in the labour market. We continue to believe this improvement will be slow and modest but it is moving in the right direction.”