Wednesday, 19 March 2014

March 2014 Labour Market Statistics Briefing

This morning, prior to the Chancellor of the Exchequer’s 2014 Budget speech, the Office for National Statistics published the Labour Market Statistics (LMS) release for March.  The Government, the Opposition and commentators in the media will pay particular attention to both the employment trends and earnings estimates, indicating the extent of wider recovery in the labour market but also whether the ‘cost of living crisis’ (the Opposition’s term for the sustained period of sub-inflation earnings growth) is likely to significantly improve prior to the General Election in spring 2015.  The Government, including the Prime Minister, have already greeted this morning’s data as a sign that their ‘long term economic plan’ is working, whilst the Opposition continue to draw attention to the earnings element of the ONS release.

The latest LMS summarises Labour Force Survey (LFS) data for the period November 2013 to January 2014, and Jobseeker’s Allowance (JSA) claimant data for February 2014.  Following confusion in the media over last month’s release, the ONS have clarified their guidance that the employment and unemployment rates from the latest 3 month period published in each successive monthly LMS should only be compared to the previous non-overlapping 3 months included in the same LMS publication, rather than the rate published in the previous LMS release (which will include 2 months’ overlapping data).  This additional clarification is important as the latest unemployment rate has fallen to 7.2% on the previous non-overlapping quarter (7.4% in August to October 2013) but is level with the rate published in February’s LMS (for the period October to December 2013).  Although the ONS clearly state that unemployment has fallen on the previous non-overlapping quarter, and that last month’s published rate is not directly comparable “as the labour Force Survey is not designed to measure monthly changes”, City commentators quoted in this morning’s news continue to make this comparison - somewhat inaccurately suggesting that unemployment has “held steady” at 7.2%.

Alongside the fall in unemployment, both the number employed and the employment rate have increased - although the ONS report that this was driven entirely by a significant increase in the number self-employed, with a fall in the number of employees.  This raises concern around the sustainability of recovery beneath these headline figures, with earlier analysis by the ONS and the TUC suggesting that recent increases in self-employment may indicate ‘necessity entrepreneurship’.  This describes individuals potentially ‘trading down’ on their skills, indicated by the higher proportions of recently self-employed individuals in lower skill occupations compared to those who became self-employed prior to the onset of recession in 2008.

Finally, earnings data in the latest LMS indicates an increase in annual earnings growth compared to previous periods, with regular pay (excluding bonuses) increasing by 1.3% on the previous 12 months.  This remains lower than the current rate of inflation (1.9% on the Consumer Prices Index) – but the gap between earnings growth and inflation has narrowed.  However, there is a significant gap between public and private sector pay, with regular pay for individuals working in the private sector increasing by 1.6% over the year, compared to only 0.6% for those working in the public sector.

Unemployment and Employment Rates
According to the latest Labour Force Survey data (for November 2013 to January 2014), the unemployment rate[1] fell by 0.2 percentage points on the previous quarter, to 7.2% of the economically active population aged 16 and over.  The number unemployed fell by 63,000 on the previous quarter  (August to October 2013).  The total number of adults who are estimated to be unemployed is 2.33 million.

The number of people unemployed for over one year has also decreased, by  38,000 on the previous quarter (to a total of 828,000). 

Youth unemployment also fell on the previous quarter, by 0.7 percentage points to 19.8% of economically active 16 to 24 year olds, equivalent to 912,000 individuals.

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.3 percentage points to 72.3%, equivalent to 30.19 million resident adults in employment in the UK (an increase of 105,000 on the previous quarter).

This increase was entirely driven by self-employment.  The number of employees fell by 60,000 (to 25.5 million) whilst the number of self-employed individuals increased very significantly on the previous quarter, by 211,000 (to reach 4.5 million).

Earnings Estimates
Earnings growth remains below the rate of general price inflation, although the gap has narrowed compared to previous periods.  Between the periods November 2012 to January 2013 and November 2013 to January 2014, total pay (including bonuses) rose by 1.4% and regular pay (excluding bonuses) by 1.3%.  General price inflation on the Consumer Prices Index is currently 1.9%.

Job Seekers’ Allowance Claimants
The number of Jobseekers’ Allowance (JSA) claimants in February 2014 fell on the previous month, by 34,600, whilst the rate was down 0.1 percentage points to 3.5% (and down 1.1 percentage points on the same month a year earlier).  This is the ninth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies
In the three months to January 2014, 117,000 people were made redundant, down 2,000 from the previous quarter and down 15,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to February 2014 increased by 23,000 on the previous quarter to total 588,000.  The number of ILO unemployed adults to every one vacancy in the three months to January 2014 was 4.0, down 0.3 percentage points on the previous quarter.

Key Regional Developments
  • Compared to the previous quarter, unemployment rates and levels fell in five English regions, but increased in the North West, the East Midlands and the East of England.  In Yorkshire and the Humber, the number unemployed increased slightly, but the unemployment rate remained stable compared to the previous quarter, at 8.7%.
  • The most significant falls in unemployment were in the South East and the West Midlands, where the numbers unemployed fell by 24,000 and 19,000 respectively, and the unemployment rates fell by 0.6 percentage points in both cases.  The lowest unemployment rate of the nine regions was in the South East, at 5.2%.
  • The North East continues to have the highest rate of unemployment of the nine regions, at 9.5%, although this fell by 0.6 percentage points on the previous quarter.  The largest increase in unemployment was experienced in the North West, where 22,000 additional individuals were estimated to be unemployed compared to the previous quarter, with the rate increasing by 0.6 percentage points to 8.1%.
  • In the East Midlands, the unemployment rate was 7%, up 0.1 percentage points on the previous quarter, although this remains slightly lower than the average for the UK (7.2%).  This is equivalent to 164,000 individuals unemployed according to the ILO definition, up 2,000 on the previous quarter.  The employment rate fell slightly, by 0.1 percentage points to 72.6% - above the average for the UK (72.3%).

[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.

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