Wednesday, 15 May 2013

May 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release for May 2013.   This contains Labour Force Survey data for the period January to March 2013 and Jobseeker’s Allowance (JSA) claimant count data for April 2013.  Despite the emphasis given in the media to the increase in unemployment (of 15,000 individuals) on the LFS measure compared to the previous quarter, the latest level of unemployment is lower compared to the same period a year earlier.  On balance therefore, this month’s release points to a flatter trend than indicated last month (where unemployed increased more significantly, by 70,000 on the previous quarter).  Unemployment on the more timely claimant count has also fallen slightly on the previous month.  This fairly flat picture is similar for the LFS measure of employment, which has fallen compared to the previous quarter but has increased compared to the same period a year earlier.
Despite these headline indicators appearing flatter compared to last month, there are a number of concerning trends within the data.   The numbers of adults unemployed for over one year and over two years have both increased.  However, the biggest story remains the very weak rate of earnings growth, with annual growth in regular pay remaining at the lowest rate since records began in 2001, at 0.8%.  Total pay, which includes bonuses, has fallen to 0.4%, the lowest since March to May 2008.
 With the Bank of England’s Quarterly Inflation Report also published today, confirming that inflation on the CPI measure has remained at 2.8% (for March 2013), these earnings estimates highlight the very significant squeeze on household incomes.  In his opening remarks at the press conference for the Inflation Report, the outgoing Governor Mervyn King noted that inflation has remained above its 2% target rate for much of the last five years, and earnings growth has remained lower than inflation throughout the last five years.  Furthermore, the Bank of England expect inflation to remain above 2% for the next two years – due to continued external price pressures (e.g. commodities like oil and food produce, imported goods and services and international energy prices) alongside “unusually large increases” in administered or regulated prices (e.g. tuition fees and the impact of increased UK-based energy suppliers’ contributions to the national grid on domestic energy prices).  Although the Governor argued that there was a “welcome change in economic outlook” behind the Bank’s more optimistic predictions for output growth, he also noted the continued weak labour productivity data (currently estimated to be at 2005 levels) which, alongside weak earnings growth, has been a consistent story since we published our first monthly briefing.
Unemployment and Employment Rates
LFS data for the three months to March 2013 indicate that the unemployment rate[1]  has increased by 0.1 percentage point on the previous quarter (the three months to December 2012), to 7.8% of the economically active population.  This is equivalent to an increase of 15,000 individuals.   However, compared to the same period a year earlier, the number of unemployed adults has fallen by 92,000, and the rate has also fallen by 0.4 percentage points.  The number estimated to be unemployed is currently 2.52 million.
The number of adults unemployed for up to six months has increased by 3,000 (to 1.19 million), whilst the number unemployed for over a year has increased by 23,000 (to reach 902,000 individuals).  Of these, 464,000 have been unemployed for more than two years, which is an increase of 21,000 from the previous quarter.
The employment rate (for adults aged 16-64) has fallen on the previous quarter, by 43,000 or 0.2 percentage points, to a rate of 71.4%.  However, this is 0.8 percentage points higher than the same period a year earlier, equivalent to an increase of 434,000 individuals.  The total number of people estimated to be in employment in the UK is 29.71 million.
Earnings Estimates
Earnings growth, which has remained weak for the five years since the onset of recession, is even weaker than reported last month.  Total pay (including bonuses) increased by only 0.4% between January 2012-March 2012 and January 2013-March 2013 (compared to 0.8% reported last month), whilst regular pay (excluding bonuses) increased by 0.8%.   The increase in regular pay is the lowest since comparable records began in 2001.
With inflation on the CPI remaining at 2.8%, prices are continuing to increase 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 April 2013 fell on the previous month, by 7,300, whilst the rate fell by 0.1 percentage points to 4.5% (and by 0.2 percentage points on the same month a year earlier).
Redundancies and Vacancies
In the three months to March 2013, 140,000 people were made redundant, down 5,000 from the previous quarter and down 32,000 from the same period a year earlier.
The number of vacancies (advertised through Jobcentre Plus) in the period February to April 2013 increased by 11,000 on the previous quarter to total 503,000.  The number of ILO unemployed adults to every one vacancy in the three months to March 2013 was 5.0, unchanged from the previous quarter.
Key Regional Developments
·         Unemployment rates and levels fell compared to the previous quarter in the North West, by 0.5 percentage points and 18,000 individuals, but increased in all other English regions.
·         Unemployment increased most significantly in the West Midlands, by 0.6 percentage points and 16,000 individuals, and the South West, by 0.6 percentage points and 17,000 individuals.  The North East continues to have the highest unemployment rate of the English regions, at 9.8% of the economically active population, with the West Midlands now exceeding the rate of unemployment in Yorkshire and the Humber (at 9.2% compared to 9%).
·         In the East Midlands, unemployment has increased very slightly, by less than 1,000 individuals and 0.1 percentage points, whilst employment has decreased more significantly, by 19,000 individuals and 0.7 percentage points.  The unemployment rate in the East Midlands for the period January to March 2013 is estimated to be 7.8%, in line with the UK average, whilst the employment rate is estimated to be 70.8%, below the UK average (of 71.4%).
·         The total size of the labour force (economically active adults), has continued to decline in the East Midlands, with the economically active population falling by 19,000 on the quarter, whilst the number who are economically inactive (neither in work nor unemployed ) has increased by 20,000 on the previous quarter.   This suggests that a significant number of individuals could be moving directly from employment to economic inactivity.

[1] 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.