This
morning, the Office for National Statistics published the Labour Market
Statistics (LMS) for February 2015, which draws on Labour Force Survey data for
the final quarter of 2014 (October to December) and Jobseekers’ Allowance data
for January 2015.
This is
the first monthly LMS published within the 100 days prior to the General
Election on the 7th of May. The
state of the labour market will be a key battle ground between the two largest
parties. The Conservatives are
emphasising the strength of recovery - the extent of increasing employment and
falling unemployment - and are likely to continue to do so, presenting
themselves as the party of job creation.
The Secretary of State for Work and Pensions, Ian Duncan Smith,
described the recovery as “jobs-led” and that is was “changing lives for the
better on a daily basis,” according to the BBC. Labour, on the other hand, are emphasising
the uneven nature of the recovery and the poor quality of many jobs (part-time,
temporary, etc.), contributing to weak wage growth and what they call the ‘cost
of living crisis’. Shadow Employment
Minister Stephen Timms’ response to Duncan-Smith was to argue that working
people are “£1,600 a year worse off since 2012.”
This
month’s LMS suggests that there are elements of truth behind both perspectives. Employment has continued to increase. There were 103,000 more individuals employed
in the latest quarter compared to the previous Labour Force Survey Period, July
to September 2014. Notably, this
increase has outstripped the growth in the working age population, meaning that
the employment rate increased (although only slightly) to 73.2%. This is higher than the pre-recession peak of
73% and level with the highest rate on record (which was in the three months to
February 2005). Unemployment is now well
below the 2 million level experienced through the period of recession, at 1.86
million (97,000 fewer than the previous quarter) although, again, the
unemployment rate has only fallen very slightly, to 5.7%.
But
looking beneath these headline indicators, it is difficult to agree with the
Conservative claim that lives are being substantively improved across the
country. Data pertaining to quality of
work and living standards continues to suggest an uneven recovery. The increase in real earnings is more due to
the very low rate of inflation at the present time (0.3% on the CPI in the 12
months to January) rather than a recovery in nominal earnings growth. Excluding bonuses, average pay increased by
1.7% between October to December 2014 and the same period a year earlier -
which is not substantively different than the rates of earnings growth
estimated over much of the period following the onset of recession in 2008. Furthermore, although the number of employees
increased significantly (by 2.2% compared to the same period a year earlier) –
the number of these who were on temporary contracts increased far more
significantly (by 5.1%, to a total of 1.7 million individuals).
Geographically,
there continues to be significant variation in the extent of recovery. Although unemployment fell in the majority of
English regions and UK nations on the previous quarter, it increased in the
North West, the East of England, London and Wales, whilst economic inactivity
(people who are neither employed nor unemployed) increased in many regions and
nations.
For a
discussion on issues related to the quality of employment over the longer-term,
please see our recent article for The
Conversation. Further blog articles on
these issues will be circulated in the run-up to the election.
Unemployment
and Employment Rates
According
to the latest Labour Force Survey, for the period October to December 2014, the
unemployment rate[1] fell
by 0.3 percentage points on the previous quarter to 5.7% of the economically
active population aged 16 and over. This
is the lowest rate since the period July to September 2008, as the recession
began to impact the UK labour market, but still higher than the pre-downturn
trough of 5.2% at the end of 2007. The
number of people unemployed fell by 97,000 on the previous quarter and by
486,000 on the same period a year earlier, to a total of 1.86 million people.
The
number of people who have been unemployed for more than one year fell significantly
- by 210,000 (a fall of almost 25%) on the same period a year earlier, to a
total of 638,000 adults.
Youth
unemployment was little changed on the previous quarter, at a rate of 16.2% of
individuals aged 16 to 24 – although this is down from 19.9% in the same period
a year earlier.
The
employment rate (for adults aged 16-64) increased slightly on the previous
quarter, by 0.2 percentage points to 73.2% - which is level with the rate for
the period December 2004 to February 2005.
The rate of employment has never been higher than this since comparable
records began in 1971. The number
employed increased by 103,000 on the previous quarter to a total of 30.9
million individuals in work, which is the highest on record.
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 self-employees fell on the previous quarter (by 19,000) whilst the number of
employees increased strongly (by 154,000).
Compared to the same period a year earlier, the total number self-employed
increased by 2%, whilst the number of employees increased by slightly more (2.2%). However, the number of employees on temporary
contracts increased very significantly – by 5.1% compared to the same period a
year earlier (or an additional 83,000 individuals to a total of 1.7 million, or
6.5% of all employees).
Earnings Growth
Between October
to December 2014 and the same period a year earlier, total pay (including
bonuses) rose by 2.1% and regular pay (excluding bonuses) rose by 1.7%. This means that earnings are currently
growing in real as well as nominal terms (having shrunk in real terms through
much of the period from 2008), as the rate of earnings growth is now
significantly higher than the rate of general price inflation. However, this change is more due to the
current very low rate of inflation rather than a substantive change in the rate
of nominal earnings growth. Inflation on
the Consumer Prices Index fell from 0.5% in the 12 months to December to a
record low of 0.3% in the 12 months to January, principally due to steep falls
in fuel prices (due to low international oil prices) and lower food prices (due
to a price war between the largest supermarkets). The Bank of England are even predicting a
short period of deflation through the Spring.
Job Seekers’ Allowance Claimants
The
number of Jobseekers’ Allowance (JSA) claimants in January 2015 fell on the
previous month, by 38,600, whilst the rate was down 0.1 percentage points to
2.5% (and down 1.1 percentage points on the same month a year earlier). This is the 27th consecutive month
in which the number of claimants has fallen.
Redundancies and Vacancies
In the three months to December 2014, 107,000 people were
made redundant, 16,000 more than
the previous quarter but little changed from the same period a year earlier.
The number of vacancies
(advertised through Jobcentre Plus) in the three months to January 2015 increased
by 22,000 on the previous quarter to total 718,000. The number of ILO unemployed adults to every
one vacancy in the three months to December 2014 was 2.6, down by 0.2 on the previous
quarter.
Key Regional Developments
- Compared to the previous quarter, unemployment rates and levels fell in five of the nine English regions. Unemployment increased in the North West, the East of England and London, and remained flat in the South East. Unemployment also increased in Wales, though it fell in Scotland and Northern Ireland.
- Unemployment fell most significantly in the West Midlands, by 1.2 percentage points and 32,000 individuals (although the rate remains above the national average, at 6.1%). The North East continues to have the highest rate of unemployment of the nine English regions, at 8%.
- In the East Midlands, the unemployment rate fell by 0.8 percentage points on the previous quarter to 4.9%, significantly below the national average of 5.7%. This is equivalent to 17,000 fewer individuals unemployed compared to the previous quarter. The total number unemployed in the region in the three months to July 2014 was 115,000.
- The rate of employment increased in the East Midlands, to 74.5%, whilst the number of people employed increased by 37,000 on the previous quarter. The employment rate in the region is higher than the UK average, which was 73.2% in the three months to December 2014.
[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.