Job losses are starting to pick up as the economy deteriorates. That’s bad news for Johnson and his Conservatives

The latest Purchasing Managers Index registered a surprise fall in services activity while jobs are being axed at the fastest pace since 2009, writes James Moore

The services sector encompasses everything from the City of London’s banks to your local convenience store (PA)

The word “ugh” comes to mind as the best way to describe the latest trio of UK Purchasing Managers Index numbers produced by IHS Markit/CIPS.

The final one to roll, or rather, limp in with a puncture, was the figure for the UK’s dominant services sector.

It came in at 49.5, with anything below 50 indicating shrinkage. As such it wasn’t as bad as those for manufacturing (48.3) or construction (43.3).

But what it says about the UK economy is worrying indeed.

Services covers everything from your local convenience store to the City’s great investment banks. It dwarfs the other two as a contributor to UK plc.

Over the previous couple of months the services PMI has just about kept its place on the ladder while the other two were sliding down snakes. Now it has joined them, the all-sector PMI has drifted down to 48.8 from 49.7. It should be stated that these are just indicators that don’t always chime with the official data. But they do a fine job in that capacity. They give a good indication of the direction of travel, which is why they’re so closely watched by economists.

Here’s what I’ve found interesting through watching the lot of them over the past few months. Economists are often criticised for being gloomy gooses, especially by Brexiteers when they find their conclusions discomforting.

Yet of late, they haven’t been anything like as gloomy as they should have been. Over the past three months, the City’s pointy heads have consistently overestimated the numbers.

Manufacturing was an exception this time around. While its PMI showed the sector shrank in September, it was by less than economists had forecast per the regular Reuters poll, largely as a result of renewed no-deal Brexit stockpiling. But the other two were both worse.

I’ve read the views of a lot of economists and talked to some too. Something else they’ve been playing down is the likelihood of a recession, for which the UK would have to show two consecutive three month quarters of declining GDP. It remains to be seen whether they’re underestimating the threat of that too.

There’s another interesting takeaway from these figures, which comes in the form of a question. How long can the UK’s notably robust labour market stay that way in the light of them?

Part of what’s kept it healthy is that firms have been choosing to prioritise hiring over investing in things like machinery, a point made by the Bank of England among others. You can get rid of people and save money by doing so. You can’t so easily dispose of kit. That, at least, is how the thinking goes.

But there have recently been signs that this may be coming to an end. Services sector jobs, for example, are now being lost at the fastest pace since 2009.

Unemployment is a lagging indicator because firms prefer to leave laying people off until they no other choice. Layoffs are a nasty business. They’re disruptive. You inevitably lose good people. You lower the morale of those that remain. It’s also expensive to recruit if you call the economy wrong.

Regrettably, we might have reached the tipping point that forces employers’ hands.

Here’s where things get interesting: it’s when jobs start getting culled that people really feel a downturn. Before that happens the numbers are just, well, numbers.

If the labour market is indeed losing its poise and job losses accelerate, it mightn’t look too good for Boris Johnson’s electoral prospects. The opposition has so far held its nerve, refusing to rise to the lure of his stunts and his taunting by granting him the election he wants.

They’d be wise to hold it for a little longer.