Yesterday morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for September. This draws on Labour Force Survey data for the period May to July 2014 and Jobseekers’ Allowance (JSA) claimant count data for August.
These latest estimates indicate a continuation in the positive general trends observed since the end of 2011, with employment rising and unemployment falling. However, earnings growth remains very weak – and well below the rate of general price inflation. Sub-inflation rates of earnings growth were observed for much of the period of recession starting in 2008, and have subsequently shown little signs of improvement despite the recovery in other key indicators.
The number in employment in the UK increased on the previous quarter (February to April 2014), although the increase was relatively small (74,000) - the smallest quarterly increase in employment since April to June 2013. The fall in unemployment (of 146,000) was more significant. This can be partly explained by an increase in economic inactivity (individuals who are neither employed nor unemployed), which rose by 114,000 on the previous quarter. This increase was principally due to 41,000 more individuals staying at home to look after family members and 33,000 and 8,000 more individuals who were long-term and temporarily sick respectively. The number of individuals who were economically inactive because they were full time students (the largest group of economically inactive) only increased slightly on the previous quarter (and fell on the previous year), whilst the number of retirees and ‘discouraged workers’ (those who were not looking for work because of a lack of available jobs) both fell on the previous quarter and the year.
The key positive development that has been widely reported in the news is that fact that the JSA claimant count fell below 1 million for the first time since August 2008. However, the weak rate of pay growth has also been emphasised, with a 0.6% increase in total pay (including bonuses) in the period May to July 2014 compared to the same period a year earlier, below the rate of general price inflation (1.5% on the CPI for the 12 months to August). This has sometimes been reported misleadingly, with the Guardian claiming signs that the “pay squeeze may be easing” by comparing the latest estimate to that published in August (-0.2% for the period April to June 2014), despite the fact that the ONS strongly advise against comparing consecutive monthly releases, given the 2 overlapping months within the 3-month Labour Force Survey periods. In the previous non-overlapping quarter (February to April 2014), total pay grew by 0.8% - close to the latest estimate of 0.6% and also significantly below the rate of general price inflation at that time, demonstrating the lack of significant change in earnings growth through 2014 so far.
Unemployment and Employment Rates
According to the latest Labour Force Survey, for the period May to July 2014, the unemployment rate fell 0.4 percentage points on the previous quarter to 6.2% of the economically active population aged 16 and over. This is the lowest rate since the period August to October 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 146,000 on the previous quarter, to 2.02 million adults.
The number of people unemployed for over one year has also decreased, by 67,000 on the previous quarter (to a total of 723,000).
Youth unemployment also fell on the previous quarter, from 18.5% to 16.6 % of economically active 16 to 24 year olds (equivalent to 747,000 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 very slightly on the previous quarter, by 0.1 percentage points to 73%, which is equivalent to 30.61 million resident adults in employment in the UK (an increase of 74,000 on the previous quarter). This is significantly smaller than the increase in employment reported in previous months, and is the smallest quarterly increase since April to June 2013.
In previous recent LMS releases, self-employment has accounted for a large share (and in the some cases the majority) of the increase in the number of individuals in employment. In the latest LMS, the number of additional self-employees is relatively small (4,000 on the previous quarter) and the increase in employees is much larger (65,000 on the previous quarter).
Between May to July 2014 and the same period a year earlier, total pay (including bonuses) rose by 0.6%, very significantly below the rate of general price inflation (1.5% on the CPI in the 12 months to August 2014). Regular pay (excluding bonuses) rose by 0.7%.
Job Seekers’ Allowance Claimants
The number of Jobseekers’ Allowance (JSA) claimants in August 2014 fell on the previous month, by 37,200, whilst the rate was down 0.1 percentage points to 2.9% (and down 1.3 percentage points on the same month a year earlier). This is the fifteenth consecutive month in which the rate of claimant count unemployment has fallen and the first time since 2008 that the number of JSA claimants has fallen to below 1 million, at 966,500 individuals.
Redundancies and Vacancies
In the three months to July 2014, 91,000 people were made redundant, 29,000 fewer than the previous quarter and the lowest number of redundancies recorded in a quarter since comparable records began in 1995.
The number of vacancies (advertised through Jobcentre Plus) in the three months to August 2014 increased by 23,000 on the previous quarter to total 673,000. The number of ILO unemployed adults to every one vacancy in the three months to July 2014 was 3.1, down 0.3 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 and the South West (by 1,000 individuals and 0.1 percentage points on the previous quarter in both regions). The highest unemployment rate continues to be in the North East, at 9.9%.
- Unemployment fell most significantly in the North West, Yorkshire and the Humber and the East of England. In the period May to July 2014, the lowest rate of unemployment was in the South East, at 4.4%.
- In the East Midlands, the unemployment rate fell by 0.5 percentage points on the previous quarter to 5.6%, below the national average of 6.2%. This is equivalent to 12,000 fewer individuals unemployed compared to the previous quarter. The total number unemployed in the region in the three months to July 2014 was 130,000.
- The rate of employment remained stable in the East Midlands, at 73.8%, whilst the number of people employed increased very slightly, by 1,000 on the previous quarter. The employment rate in the region is higher than the UK average, which was 73% in the three months to July 2014.
 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.