This
morning, the Office for National Statistics published the Labour Market
Statistics First Release for November, which includes Labour Force Survey data
for the period July to September 2012 and Jobseekers’ Allowance (JSA) data for October.
Although the number of adults in
employment has increased, the extent of increase is weaker than reported last
month. Moreover, whilst the quarterly
LFS measure of unemployment indicates a further fall, the more timely monthly
claimant count unemployment has increased by the largest amount in 13 months. Long-term unemployment (those unemployed for
more than a year on the LFS measure) has also increased. These developments could point to a weakening
in the labour market following the recent period of recovery – although it is
too early to say with any certainty.
This month’s data has received a more cautious reception in the media
compared to previous months, with the BBC reporting city commentators
like Howard Archer (chief UK economist at IHS Global Insight) observing a “softening
in the [UK] labour market's recent impressive resilience".
As we have
noted in earlier monthly briefings, earnings growth remains weak – with total
pay (including bonuses) increasing by 1.8% on the same period a year
earlier. With the news
reported yesterday that inflation (on the CPI measure) had
increased from 2.2% to 2.7% between September and October 2012, this continues
to point to pressure on household incomes.
Over
a longer time period, it is again pertinent to point out just how little
unemployment has increased during this recession compared to the recessions in
the 1990s and 80s, especially when one considers the depth of the contraction
in economic output experienced in the last five years. The latest estimate for the number of adults unemployed
on the LFS measure is only 865,000 higher than the same period in 2007 (July to
September). As mentioned in our
briefings last
month and in August,
a glance at the labour productivity estimates helps us understand what may be
happening. The lower than expected
increases in unemployment through the Great Recession have been accompanied by falling
labour productivity and rising unit labour costs – indicating that employers
have been ‘hoarding’ labour, in order to retain skilled staff despite falling
production levels. The further fall in
labour productivity indicated in this month’s data, alongside recent
business survey results that point to falling output in both manufacturing
and the services, suggests that the retention of this spare capacity may soon
prove unsustainable – leading to possible falls in employment over the coming
months.
Unemployment
and Employment Rates
LFS
data for the three months to September 2012 indicate that the unemployment rate[1]
has fallen by 0.2 percentage points on
the previous quarter, to 7.8% of the economically active population, which is
equivalent to 2.51 million individuals.
This is 49,000 lower than the previous quarter and 110,000 lower than the
same period a year earlier. The number of young people (16-24 year olds) who
are unemployed fell by 49,000 on the previous quarter – to reach 963,000. This is equivalent to 20.7% of young people.
However,
long-term unemployment (adults unemployed for more than year) increased by
12,000 on the previous quarter, to reach 894,000 individuals.
The
employment rate (for adults aged 16-64) increased slightly, by 0.2 percentage
points on the previous quarter, to 71.2%.
The total number of people estimated to be in employment is 29.58
million, up 100,000 on the previous quarter. However, this increase is less than half the
increase reported in last month’s statistical first release. The employment rate remains lower than its
pre-recession peak of 73% (March-May 2008).
Both
full-time and part-time employment increased, by 51,000 and 49,000
respectively. Compared to previous months, the increase in
part-time employment appears particularly weak.
Earnings
Estimates
Earnings
estimates continue to point to weak growth in average pay levels, with regular
pay (excluding bonuses), rising by 1.9% between the three months to September 2012
and the same period a year earlier. Total
pay (including bonuses) increased by 1.8% .
In both measures, earnings growth between the latest quarter
(July-September 2012) and the same period a year earlier is only 0.1 percentage
points higher than the growth between June-August 2012 and the same period a
year earlier.
Labour
Productivity and Unit Labour Costs
The amount of
(inflation adjusted) output per worker fell by 1.1.% between quarter 1 and
quarter 2 of 2012 whilst unit labour costs increased by 0.3% over the same
period.
Job Seekers’
Allowance Claimants
Jobseekers’
Allowance (JSA) claimants in October 2012 increased by 10,100 on the previous
month, to reach 1.58 million. The
claimant count rate was 4.8%, unchanged from the previous month and the same
period a year earlier.
Redundancies
and Vacancies
In the three months to September 2012, 128,000 people had
become redundant, down 22,000 from
the previous quarter and down 19,000 from the same period a year earlier.
The number of vacancies
(advertised through Jobcentre Plus) in the three months to October 2012 was 479,000
- up 1,000 compared to the previous
quarter and up 16,000 on the same period a year earlier. The number of ILO unemployed adults to every
one vacancy in the three months to September 2012 has fallen to 5.2, compared
to 5.4 in the previous quarter.
Key Regional
Developments
- The level of unemployment fell compared to the previous quarter in the North East, North West, Yorkshire and the Humber, the West Midlands and the East Midlands – most significantly in the North West, by 26,000 and 0.7 percentage points, and in Yorkshire and the Humber, by 20,000 and 0.7 percentage points. The North East continues to have the highest unemployment rate of the nine English regions, at 9.8%, followed by Yorkshire and the Humber, at 9.1%.
- Unemployment levels increased in the East of England, London and the South East, by 8,000, 6,000 and 6,000 respectively, although the rates remained largely unchanged.
- In the East Midlands, employment fell slightly on the previous quarter, by 3,000 or 0.2 percentage points, to a rate of 71.4%, slightly higher than the UK average of 71.2%. Unemployment also fell, by 15,000 and 0.6 percentage points, to a rate of 7.7% (compared to 7.8% in the UK). Employment and unemployment both decreased in the East Midlands due to a corresponding increase in Economic Inactivity (with 19,000 more adults economically inactive compared to the previous quarter). This could represent an increase in the number of people in full-time education as well as an increase in ‘discouraged workers’ (individuals who have been unemployed for long periods of time and have given up looking for work, thus no longer meeting the ILO criteria for unemployment).
[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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