On headline measures the labour market remains healthy. Conditions are tight and this continues to feed into decent real pay growth – 2.0 per cent in the three months to August 2019, not far off the levels we came to expect before the recession.
But alongside positive headlines are signs that the labour market is cooling. Certainly, things are no longer improving, either in terms of pay growth or employment – both nominal pay growth and the employment rate ticked downwards in the latest data. And so the question is – is the labour market at a turning point? How long will pay continue to grow at this rate?
The clearest signs of cooling are seen in measures of labour demand, and in the employment data. The number of unfilled vacancies has been falling for eight months in a row. There are 50,000 fewer vacancies now than at the beginning of the year, and the unemployment-to-vacancies ratio (a measure of labour market slack) has bottomed out. On employment – the employment rate ticked down by 0.2 percentage points over the latest quarter to 75.9 per cent, and the unemployment rate ticked upwards slightly.
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