On one reading of the latest unemployment figures, the UK labour market is in pretty good shape. The number of people being added to payrolls is going up and so is the number of job vacancies. Annual earnings growth is up sharply to 4.7%.
An alternative reading is that the jobless total is going up along with the redundancy rate, while the number of people employed is going down.
The confusing picture is the result of the Office for National Statistics having a variety of ways of assessing unemployment – the claimant count, the labour force survey and payroll data submitted to HMRC. All are calculated in different ways and some are more timely than others.
Parts of the story are relatively easy to understand. The big jump in average earnings growth is largely the result of job losses since the start of the pandemic being concentrated among those on low pay. The average for those that have remained in work – those on higher earnings – has gone up.
Assessing what is happening to jobs is tougher. The HMRC payroll numbers have risen for two months, and while it was possible to put the December increase down to the easing of restrictions following November’s four-week lockdown in England, January saw the reimposition of tough restrictions.
While it is hard to imagine why firms would be adding to their payrolls in such circumstances, there are a few reasons why they might have done so. One is that businesses have become savvy when it comes to operating through lockdown. Another is that the January lockdown was accompanied by promising news on vaccines that might have encouraged firms – especially those that have done well during the crisis – to hire more staff. Finally, the government was quick to announce the extension of its furlough scheme, a move that might have persuaded employers that they could hang on until better times arrive.
One thing almost every analyst and commentator is agreed on, though, is that the crunch period for the labour market will arrive as the wage subsidies are phased out this year. A clearer picture will then emerge.