UK unemployment stable but falling vacancies data 'suggests slowing'

UK unemployment barely changed in June, according to official data released on Wednesday, but July saw lower vacancies and an unexpected fall in the claimant count.

Unemployment remained at 4.9% in June, the Office for National Statistics confirmed, the same as the previous month as economists expected.

Before any impact of the June 24 Brexit decision was apparent, the employment rate rose to a new record of 74.5%, the highest since comparable data was first taken in 1971, ONS said.

UK average weekly earnings grew 2.4%, though again the market expected the improvement from the 2.3% reading in May.

The only real surprise was claimant count data that ONS released for July, which showed a 8,600 fall versus the consensus estimate for a 9,500 rise after the previous month's 0.4k increase. The claimant rate remained at 2.2%.

Moreover, the 741,000 job vacancies for the period from May to July 2016 was the lowest level since last October.

“Little of today’s data cover the period since the result of the EU referendum became known, with only the claimant count and vacancies going beyond June,” cautioned ONS statistician David Freeman.

However, recent surveys have shown evidence of a slowing, with REC/Markit's finding permanent placements fell for a second successive month in July and at the fastest rate since mid-2009, while a survey by CIPD/Adecco indicated companies were becoming more cautious in their hiring intentions.

Economist Howard Archer at IHS Markit said while the labour market had showed impressive resilience in the run-up to the EU referendum and the immediate aftermath of the vote to leave, helped by GDP growth improving in the second quarter – "it would be premature to draw any firm conclusions from this".

Sam Tombs at Pantheon Macroeconomics said the ONS data was the first hard figures since referendum but suggested what economic recovery the UK was enjoying was slowing, although this was not a "resounding recession signal".

He noted that the fall in the three-month average number of job vacancies to July is smaller than the 20,000 decline that would be consistent on past form with recession.

"Still, the vacancy measure is a three-month average, so it is not a “clean" post-referendum sample. We expect bigger declines in vacancies over the coming months."

Tombs added that July’s claimant count data was never likely to show a sharp deterioration, because the data were collated just three weeks after the vote and employment laws prevent firms from making workers immediately redundant.

Archer said that while the data suggested companies generally avoided a knee-jerk reaction to the leave vote by getting rid of workers, "it remains likely that softening economic activity and heightened uncertainty will take a toll on the labour market over the coming months".

IHS Markit still believe the heightened uncertainty and concerns among businesses following the Brexit vote as well as a weakening economic performance will take an increasing toll on the labour market going forward, as supported by recent survey evidence.