This morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release for April 2013. This summarises data from the Labour Force Survey for the period December 2012 to February 2013 alongside Jobseekers’ Allowance claimant count data for March 2013 and recently released (28th March, 2013) estimates of labour productivity and labour costs for the final quarter of 2012.
With the funeral of former Prime Minister Margaret Thatcher due to take place today, which has resulted in the cancellation of the weekly Prime Minister’s Questions (where the monthly employment statistics are often debated), media interest in this release may be more muted. However, there is an important change in the data – an increase in unemployment, of 70,000 individuals compared to the previous quarter, which is significantly greater than the slight increase (7,000) reported last month. This has resulted in the unemployment rate increasing by 0.2 percentage points to 7.9%, equivalent to 2.56 million individuals unemployed but actively seeking work. The employment rate has remained flat, although the number of people in employment has fallen slightly.
This is significant because, until last month’s release, unemployment had been falling quarter-on-quarter since autumn 2011. Politically, this has been very important to the UK Government because the relative strength of the labour market has been used to counter criticism of their continued commitment to budgetary austerity. In last month’s briefing, we drew attention to the emphasis placed by Ministers, including the Prime Minister, on continued falls in unemployment.
Alongside the increase in the headline unemployment measure, which has already been reported by the BBC, there have been a number of other developments that point to a possible deterioration in labour market conditions. Since the start of Financial Crisis and subsequent recession, earnings growth has been consistently lower than the level of inflation (which was estimated to be 2.8% on the Consumer Price Index in March 2013). The latest estimates suggest that earnings growth has now fallen to its lowest level since autumn 2009, with total pay (including bonuses) increasing by only 0.8% between the periods December 2011-February 2012 and December 2012-February 2013.
Finally, the latest labour productivity data adds to concerns that commentators have held for some time – productivity is continuing to fall although employment has remained relatively stable, meaning that unit labour costs may be becoming unsustainable for many firms. The Bank of England’s Agents’ Summary of Business Conditions for April, also published this morning, suggests that the annual rate of growth in labour costs has increased slightly amongst Manufacturing employers, and that employers in both Manufacturing and Service sectors were under-utilising available capacity. According to the quarterly estimates summarised in today’s LMS First Release, output per worker fell by 0.8% between the 3rd and 4th quarters of 2012 whilst unit labour costs increased by 0.5% over the same period. Unit labour costs have now increased in all but one of the quarters since the 4th quarter of 2010.
Unemployment and Employment Rates
LFS data for the three months to February 2013 indicate that the unemployment rate has increased by 0.2 percentage points on the previous quarter (the three months to November 2012), to 7.9% of the economically active population. The number estimated to be unemployed has increased by 70,000 on the previous quarter - to a total of 2.56 million.
A key driver in this increase in unemployment has been an increase in the number of people actively engaging in the labour market (i.e. available for work and actively seeking work). Compared to the previous quarter, the number of people not in the labour force (known as ‘economically inactive’, including full-time students, full-time parents and carers, early retirees, those with work-limiting disabilities and discouraged workers) fell by 57,000. The main component of this decrease was a reduction in the number of women who were economically inactive because of family commitments (child or elder care). The number of women economically inactive because of family commitments has fallen to 2.1 million – the lowest figure since comparable records began in 1993.
The employment rate (for adults aged 16-64) has remained flat compared to the previous quarter, at 71.4%, whilst the number of people in employment has fallen slightly, by 2,000. The total number of people estimated to be in employment is 29.70 million.
Earnings growth, which has remained weak for the five years since the onset of recession, appears to be particularly weak according to the latest estimates. Total pay (including bonuses) increased by only 0.8% between December 2011-February 2012 and December 2012-February 2013, whilst regular pay (excluding bonuses) increased by 1.0%. This is lower than the growth reported last month (1.2% for both total and regular pay) and is the lowest annual earnings growth since September-November 2009.
With inflation on the CPI now estimated to be 2.8%, prices are therefore increasing at more than twice the rate of earnings – illustrating the sustained squeeze on real household incomes.
Job Seekers’ Allowance Claimants
The number of Jobseekers’ Allowance (JSA) claimants in March 2013 fell on the previous month, by 7,000, whilst the rate remained unchanged, at 4.6% - although this is down 0.2 percentage points on the same month a year earlier.
Redundancies and Vacancies
In the three months to February 2013, 137,000 people were made redundant, down 21,000 from the previous quarter and down 37,000 from the same period a year earlier.
The number of vacancies (advertised through Jobcentre Plus) in the period January to March 2013 increased by 1,000 on the previous quarter to total 495,000. The number of ILO unemployed adults to every one vacancy in the three months to February 2013 was 5.2, up 0.1 on the previous quarter – due to the increase in the number of people unemployed.
- Unemployment levels fell compared to the previous quarter in the North West and East Midlands, by 12,000 and 15,000 respectively.
- Unemployment levels and rates increased in all other regions, most significantly in the North East (by 12,000 individuals and 1 percentage point), London (by 30,000 individuals and 0.6 percentage points) and the South West (by 20,000 individuals and 0.7 percentage points).
- The North East continues to have the highest unemployment rate of the English regions, at 10.1% of the economically active population, followed by Yorkshire and the Humber, at 9.2%.
- In the East Midlands, both unemployment and employment fell compared to the previous quarter – with employment falling by 0.4 percentage points to a rate of 71%, below the UK average of 71.4%, and unemployment falling by 0.5 percentage points, to 7.7%, also below the UK average of 7.9%,
- This has happened in the East Midlands because of a decline in the total size of the labour force. Individuals appear to have moved from unemployment to economic inactivity (with an increase of 26,000 in the economically inactive population), causing a decline in the unemployment rate and number. Individuals also seem to have left employment and moved into inactivity, with 17,000 fewer people being in work.
 According to the International Labour Organisation (ILO), this is defined as those who are out of work but available for, and actively looking for, employment within a set period. This is expressed as the proportion of ‘economically active’ (employed plus unemployed) adults.