Slack is opening up in the UK labour market, strengthening the case for a rate cut regardless of Brexit developments.
Total hours worked (reported as a three-month moving sum) fell further in August and are down 0.5% from an April peak. This casts doubt on current official estimates showing monthly GDP rising above its prior February / March high in July / August.
Falls in employment and hours worked had been signalled by a downturn in vacancies, which peaked in January (three-month moving average). The decline continued in September, albeit at a slower pace, while redundancies in the three months to August were the highest since 2016 – see first chart.
The unemployment rate ticked up to 3.9% over June-August and would have risen by more but for a contraction of the labour force, reflecting an increase in “inactivity” – second chart.
Benefit claims data suggest a further pick-up. The old claimant count measure has been distorted by the roll-out of universal credit but the Department for Work and Pensions calculates an adjusted series, based on modelling what the count would have been if the current benefits system had been in place since 2013. This “alternative” count bottomed as long ago as February 2018, with a three-month increase of 43,000 in August the highest since inception – third chart.