LONDON – New Bank of England Monetary Policy Committee member
Martin Weale gave the following statement on the labour market
policy to the Treasury Select Committee Tuesday. This is part 2 of the
his full statement, with part 1 on the wire at 1033 GMT.

Q: How would you describe the state of the UK labour market at
present?

“The labour market has stabilised in recent quarters, and there are
signs of some recovery in employment in the latest data. According to
the Labour Force Survey (LFS), employment rose by 184,000 in the three
months to May compared with the three months to March. Unemployment fell
by 49,000 over the same period, and the LFS unemployment rate has fallen
slightly to 7.8%. Other indicators are consistent with the labour market
showing signs of improvement. Workforce Jobs rose slightly in Q1, and
claimant count unemployment has been falling gradually since November
2009.

Although unemployment has risen substantially, it has not risen by
as much as might have been feared given the fall in output. That is in
part because of cuts in hours. But total hours fell by less than in
previous recessions. The main factor behind this is that there has been
greater flexibility in real wages than has been seen in the past. The
outlook for employment will depend on the strength of the recovery in
demand and developments in productivity.

Most surveys of employment intentions have improved. And the number
of vacancies has increased since late 2009, though it remains well below
pre-recession levels. But output per hour, as measured by the ONS, is
still 2% below its prerecession peak despite recent rises. This suggests
that there is a real risk that employment will pick up more slowly than
private sector output. The fiscal consolidation will also act as a drag
on employment: the Office for Budget Responsibility projects that public
sector employment will fall by approximately 600,000 between April 2011
and April 2016, with around half of the job losses occurring over the
first three years of this period.”

-London newsroom: 4420 7862 7491; email: drobinson@marketnews.com

[TOPICS: M$B$$$,M$$BE$,MSSFX$,MT$$$$]