Here Scott Corfe, Senior Economist, Centre for Economics and Business Research, looks at what the future might hold for the UK economy…
"The latest from the Office for National Statistics showed the ILO rate of unemployment in the UK stood at 8.2% for the three months to April.
"This is down 0.2 percentage points on the quarter – a decrease of 51,000 individuals out of work. The more timely claimant count measure of unemployment, however, rose by 8100 between April and May, suggesting that labour market conditions remain fragile.
"Despite a slight improvement in the headline measure of unemployment, earnings data remain dire. For the whole economy, the annual growth rate of regular pay was just 1.8% for the three months to April. So although consumer price inflation fell in May to stand at 2.8%, the weakness of earnings growth means that household incomes are still struggling to keep pace with the rising cost of living.
"The latest labour market data show that public sector job shedding continued at the start of 2012, with 39,000 jobs lost in the first quarter of the year. Encouragingly, the private sector created 205,000 jobs over this time period and private sector employment stood 1.4% higher than a year ago, suggesting some rebalancing of the labour force away from government-dependence is now underway.
"Despite a fall in the headline rate of unemployment, [today's] release continues to paint a fairly weak picture of the UK labour market – earnings growth is incredibly low and trailing behind inflation despite recent falls in price growth.
"And the unemployment rate remains well above pre-recession levels. Furthermore, the parlous global economic situation at present – with many downside risks to growth from the euro zone sovereign debt crisis – means that unemployment could start rising again. The private sector could refrain from further job creation given the huge amount of economic uncertainty.
"With the Government committed to fiscal austerity, the onus continues to lie with the Bank of England to support growth and jobs through loose monetary policy. Minutes from the Monetary Policy Committee's June meeting, [also released today] showed four out of nine members – including Bank Governor Mervyn King – voting to expand the programme of quantitative easing in light of the dismal economic situation. So more money printing later this year is almost certain."
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