This morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for July. This draws on Labour Force Survey data for the period March to May 2014.
There continues to be very positive developments in labour market participation, with the latest employment rate equal to the highest rate on record (73.1% - which was last attained in the three months to February 2005). Unemployment has fallen significantly, to the lowest rate since the three months to December 2008. There was also a significant fall in the number of people who were economically inactive (out of work but not actively seeking employment, such as those with long-term illnesses, full-time study or caring responsibilities, or ‘discouraged workers’ – individuals who have been unemployed for long periods of time and have given up looking for work).
However, earnings growth continues to be very weak, significantly lower than the rate of inflation, with the rate of regular pay growth (which excludes bonuses) at the lowest level since comparable records began - at only 0.7%, compared to the rate of general price inflation of 1.9% on the Consumer Price Index for the 12 months to June. This has been a key characteristic of the UK labour market throughout the recession that started in 2008 and the subsequent period of recovery. Employment levels and rates did not fall by anything like the extent experienced in previous recessions in the 1970s, 80s and 90s, but earnings growth has remained weak for much of the period – and has not recovered as employment has increased and unemployment has fallen. This is due to weak productivity through much of the period and a shift in the structure of employment, including increased part-time working and a higher proportion of self-employment – particularly in low pay, low skilled activities.
From an employer perspective, the Derbyshire, Nottinghamshire and Leicestershire Chambers of Commerce Quarterly Economic Survey (QES) for the second quarter of 2014 indicates a strengthening recovery. Compared to quarter 1 of 2014, an increased proportion of firms stated that they were now operating at full capacity and an increased proportion had sought to recruit new staff over the three months prior to interview. Looking forwards over the next 12 months, the majority of respondents expected turnover to rise. However, firms reported concerns over difficulties in recruiting skilled staff - which was particularly a challenge for manufacturing firms.
Unemployment and Employment Rates
According to the latest Labour Force Survey, for the period March to May 2014, the unemployment rate fell 0.4 percentage points on the previous quarter to 6.5% of the economically active population aged 16 and over. This is the lowest rate since the period October to December 2008, as the recession began to impact the UK labour market. However, it remains higher than rates maintained prior to the recession, which were consistently lower than 6% throughout the period 2000 to 2007. The number unemployed fell by 121,000 on the previous quarter, to 2.12 million adults.
The number of people unemployed for over one year has also decreased, by 57,000 on the previous quarter (to a total of 749,000).
Youth unemployment also fell on the previous quarter, from 19.1% to 17.8% of economically active 16 to 24 year olds (equivalent to 817,000 individuals). However, this remains significantly higher than the pre-recession rate of 13.8% (December 2007 to February 2008).
The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.5 percentage points to 73.1%, which is equivalent to 30.64 million resident adults in employment in the UK (an increase of 254,000 on the previous quarter). This is the highest number in employment since comparable records began (in 1971) and the employment rate is now level with the highest comparable rate (for the period December 2004 to February 2005).
Although self-employment accounted for a significant proportion of the total increase in employment, the increase in the number of employees accounted for a larger share - at 190,000 additional employees compared to 78,000 additional self-employed on the previous quarter. However, the number of self-employed continues to increase at a faster rate than the number employed (at 1.7% compared to 0.7% on the quarter and 12.8% compared to 9.7% on the same period a year earlier), although the number of employees accounts for a large majority of total current employment (25.8 million compared to 4.6 million self-employed).
Between March to May 2014 and the same period a year earlier, total pay (including bonuses) rose by 0.3%, very significantly below the rate of general price inflation (1.9% on the CPI in the 12 months to June 2014). Regular pay (excluding bonuses) rose by 0.7%.
This was the lowest rate of regular pay growth since comparable records began in 2001 and reflects low pay growth across a wide range of sectors, particularly the finance & business services and construction sectors where regular pay growth was negative ( -0.7% and -1.3% respectively on the same period a year earlier).
Job Seekers’ Allowance Claimants
The number of Jobseekers’ Allowance (JSA) claimants in June 2014 fell on the previous month, by 36,300, whilst the rate was down 0.1 percentage points to 3.1% (and down 1.2 percentage points on the same month a year earlier). This is the thirteenth consecutive month in which the rate of claimant count unemployment has fallen.
Redundancies and Vacancies
In the three months to May 2014, 116,000 people were made redundant, unchanged from both the previous quarter and the same period a year earlier but down 194,000 on the high point of 310,000 recorded in the period February to April 2009.
The number of vacancies (advertised through Jobcentre Plus) in the three months to June 2014 increased by 30,000 on the previous quarter to total 648,000. The number of ILO unemployed adults to every one vacancy in the three months to May 2014 was 3.3, down 0.5 on the previous quarter.
Key Regional Developments
- Compared to the previous quarter, unemployment rates and levels fell in seven of the nine English regions – only increasing in the North East (by 5,000 individuals and 0.3 percentage points on the previous quarter) and the South West (by 3,000 individuals and 0.1 percentage points). The highest unemployment rate continues to be in the North East, at 9.6%.
- Unemployment fell most significantly in the East Midlands, the West Midlands and the South East. In the period March to May 2014, the lowest rate of unemployment was in the South East, at 4.4%.
- In the East Midlands, the unemployment rate fell by 1.4 percentage points on the previous quarter - the largest fall of the nine regions - to 5.6%, significantly below the national average of 6.5%. This is equivalent to 30,000 fewer individuals unemployed compared to the previous quarter. The total number unemployed in the region in the three months to May 2014 was 133,000.
- The rate of employment increased significantly in the East Midlands, again by the largest amount of the nine regions – by 2 percentage points on the previous quarter, to a rate of 74.4% (exceeding the UK average of 73.1%). This is equivalent to 61,000 more individuals in employment compared to the previous quarter.
 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.