December 2013 Labour Market Statistics Briefing

Yesterday morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release.   This summarises Labour Force Survey data for the period August to October 2013 and Jobseeker’s Allowance (JSA) claimant count data for November 2013.  Key indicators for the UK labour market overall continue to improve, with further increases in both the number of people employed and the employment rate alongside a further fall in both unemployment and economic inactivity (people who are neither employed nor unemployed). The number of people in employment, at 30.1 million, is the highest on record - although the rate of employment, at 72%, remains below the pre-recession peak.

The rate of unemployment, at 7.4% of the economically active population, fell on the previous quarter, although it remains significantly higher than pre-recession rates (which were around 5.5% through 2006 and 2007, and below 5% through most of 2004 and 2005). 

The fall in unemployment prompted further discussion amongst the Bank of England’s Monetary Policy Committee (MPC) around the timing of a future increase in interest rates.  Under the policy of ‘forward guidance’, Governor Mark Carney had stated that the Bank would maintain interest rates at the current level of 0.5% at least until unemployment fell below 7%.  At the time of this announcement, within the new Governor’s first 100 days from his appointment in July this year, the Bank did not expect unemployment to fall below this threshold until early 2016.  This month’s data has led to speculation that it may fall below 7% by the end of 2014, possibly triggering an earlier rise in interest rates.  This speculation led to a jump in the value of sterling.  As the UK’s currency has been rising compared to its major trading partners since March, this has in turn led to concern amongst the MPC that appreciation of the pound may act as a significant drag on the recovery.

MPC members and other policy makers and commentators remain concerned about several underlying weaknesses visible in the latest ONS data, which have been discussed in our previous monthly briefings.  These issues include record under-employment, very weak earnings growth, and relatively weak productivity (measured in the LMS in terms of labour productivity – output per hour worked).  Output per hour increased by only 0.5% between the 1^st and 2^nd Quarters of 2013, whilst unit labour costs increased by 2.2% over the same period.

A further issue dominating the public debate around the economy, labour market and the welfare system in recent weeks has been migration – in advance of the lifting of transitional restrictions on migrants from Bulgaria and Romania in January 2014.   As a follow-up to an earlier article published on the NTU website and the Huffington Post, Chris Lawton and Professor Rob Ackrill produced analysis on recent immigration and emigration flows and the contribution they have made to overall UK population change.  This article is available on the NTU website.   The observations on the higher levels of economic activity amongst EU migrants compared to all UK residents, and the lack of evidence for the existence of significant ‘benefit tourism’, has been further supported by analysis published by the ONS in the December LMS.  This indicates that EU migrants resident in the UK, especially those from the eight Central and Eastern European Countries (CEECs)  that joined the EU in 2004, had significantly higher rates of employment than average for all UK residents and when compared to those residents who were born in the UK.  This is discussed in more detail in the section below.

Unemployment and Employment Rates

According to the latest Labour Force Survey data (for August to October 2013), the unemployment rate[1] fell by 0.3 percentage points on the previous quarter, to 7.4% of the economically active population aged 16 and over.  The number unemployed fell by 99,000 on the previous quarter.  The total number of adults who are estimated to be unemployed is 2.39 million.

The number of people unemployed for over one year has also decreased, by  33,000 on the previous quarter (to a total of 866,000). 

The number and rate of young people (16 to 24 year olds) who are unemployed have also fallen on the previous quarter, with a total of 941,000 young people unemployed.  This is 20.5% of the economically active population in that age group (down 18,000 and 0.5 percentage points on the previous quarter).

The employment rate (for adults aged 16-64) for August to October 2013, increased on the previous quarter, by 0.4 percentage points to 72%, equivalent to 30.1 million resident adults in employment in the UK (an increase of 250,000 on the previous quarter).

In this month’s LMS, the ONS have included analysis of employment by country of birth, based on the July to September Labour Force Survey period.  Compared to the employment rate of all UK residents at this time (72.1%), these tables show the following:

•  EU migrants (defined as current UK residents born in the 27 EU member states excluding the UK) had significantly higher rates of employment than average, at 77.8%.  This compares to 72.7% for those born in the UK (i.e. non-migrants);
• Within this group of EU migrants, those born in the 8 Central and Eastern European Countries that joined the EU in 2004 had an employment rate of 79.1%;
• The employment rate for those born in Bulgaria and Romania, who are already resident in the UK, was 76.9%.   This is equivalent to 135,000 individuals; and
• The employment rates for non-UK born individuals from other parts of the world were lower in some cases, with the average employment rate for migrants born in non-EU countries estimated to be 64.5% in this period.

Earnings Estimates

Earnings growth remains weak and below the rate of inflation.  Total pay (including bonuses) increased by only 0.9% between the periods August to October 2012 and August to October 2013, whilst regular pay (excluding bonuses) increased by only 0.8%.  These rate of pay increase in total pay is slightly higher than the rate reported last month, though the increase in regular pay has remained the same.  The rate of inflation on the Consumer Prices Index (CPI) for the period October 2012 to October 2013 was 2.2%.  Therefore prices continue to rise at a considerably faster rate than earnings, which has been the case in almost every quarter since the onset of recession in 2008.

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in November 2013 fell on the previous month, by 36,700, whilst the rate was down 0.1 percentage points to 3.8% (and down 0.9 percentage points on the same month a year earlier).  This is the sixth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to October 2013, 120,000 people were made redundant, down 1,000 from the previous quarter and down 27,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to November 2013 increased by 22,000 on the previous quarter to total 562,000.  The number of ILO unemployed adults to every one vacancy in the three months to October 2013 was 4.3, down 0.3 percentage points on the previous quarter.

Key Regional Developments

• Compared to the previous quarter, unemployment rates and levels fell in all English regions except for London and the South West.  The most significant falls were in the North West (where the number estimated to be unemployed fell by 29,000), the West Midlands (where the number fell by 26,000(, and the East of England (where it fell by 35,000).
• The North East continues to have the highest rate of unemployment of the nine regions, at 10.1%, although this fell by 0.3 percentage points on the previous quarter.
• In the East Midlands, the unemployment rate fell by 0.4 percentage points to 6.9%, below the national average of 7.4%.  This is equivalent to 162,00 individuals unemployed in the region over the period August to October 2013.
• The employment rate in the East Midlands increased significantly on the previous quarter, by 1.2 percentage points (or 54,000 additional individuals in employment), to 72.7%.  This is higher than the UK average of 72%.

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[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.

November 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release.   This summarises Labour Force Survey data for the period July to September 2013 and Jobseeker’s Allowance (JSA) claimant count data for October 2013.  Headline developments include a continued increase in both the number of people employed and the employment rate.   The number in employment has increased to 29.95 million, which is the highest level on record.  However, the employment rate (all those in paid employment as a proportion of all working age adults resident in the UK) remains well below its pre-recession level, as the total working age population in the UK has continued to increase significantly.

Unemployment has also fallen on the previous quarter.  However, the total number of adults who are unemployed, at 2.47 million, is still well above the pre-recession level.  The latest rate, at 7.6%, remains above the rate identified  by the Bank of England (7%), below which it will consider raising interest rates.    Economic inactivity, where individuals are neither employed nor unemployed, has also fallen on the previous quarter.  Finally, the more timely measure of claimant count unemployment fell between October and September, for the fifth consecutive month.

Despite these positive developments in the headline labour market indicators, there continues to be evidence of underlying weaknesses, including rising levels of underemployment.  The proportion of employees and self-employed people working part-time because they could not find full-time work (i.e. working fewer hours than they would like) was the highest since records began in the latest LFS period.

Despite the unexpected fall in inflation reported yesterday (from 2.7% to 2.2% on the CPI), wage growth remains well below inflation.  Wages have grown more slowly than the rate of inflation in almost every quarter since the onset of recession in 2008.  This issue has been growing in prominence in political debate, with Labour attempting to focus public attention on living standards and the ‘living wage’ campaign whilst the Government have conceded that recovery will only be meaningful to the majority of people if it is accompanied with an increase in real incomes. 

Also published today was the Bank of England’s Inflation Report.   This commented on a number of labour market indicators and their significance in terms of wider recovery and future monetary policy.  The Bank describes the recent falls in unemployment as exceeding expectations (associated with the stronger than expected output growth, provisionally estimated to be 0.8% for quarter 3 of 2013).  The Bank expect that unemployment will continue to fall, as demand for labour increases, but do not believe it likely that it will fall below the 7% threshold before the end of 2014 – suggesting that it is highly likely that the base rate of interest will remain at  its current 0.5% level for the next 12 months.  Alongside this expectation of a continued, steady fall in unemployment, the Bank also expect increased demand for labour to lead to strengthening wage growth.  With inflation expected to fall back to around the 2% target within the next year, it is hoped that this will result in a return to wage growth in real terms in 2014.

Unemployment and Employment Rates

According to the latest Labour Force Survey data (for July to September 2013), the unemployment rate[1] fell by 0.2 percentage points on the previous quarter, to 7.6% of the economically active population aged 16 and over.  The number unemployed fell by 48,000 on the previous quarter.  The total number of adults who are estimated to be unemployed is 2.47 million.

The number of people unemployed for over one year has also decreased, by 19,000 on the previous quarter (to a total of 890,000).  However, the number unemployed for between 6 months and a year has remained stable compared to the previous quarter, at 428,000.

The number and rate of young people (16 to 24 year olds) who are unemployed have also fallen on the previous quarter, with a total of 965,000 young people unemployed (down 9,000 from April to June 2013) which is 21% of the economically active population in that age group (down 0.4 percentage points on the previous quarter).

The number of employed and self-employed people who stated that they were working part-time because they could not find full-time work reached 1.46 million in July to September 2013, the highest since records began in 1992 – equivalent to a third of employed men and 13.5% of employed women.

The employment rate (for adults aged 16-64) for July to September 2013 increased on the previous quarter, by 0.3 percentage points to 71.8%, equivalent to 29.95 million resident adults in employment in the UK (an increase of 177,000 on the previous quarter).   The current employment rate remains below the pre-recession rate  (although the number is significantly higher) because there has been a sustained and significant increase in the total population of working age adults in the UK, increasing by 36,000 on the previous quarter and 86,000 on the same period a year earlier.

Earnings Estimates

Earnings growth remains weak and below the rate of inflation.  Total pay (including bonuses) increased by only 0.7% between the periods July to September 2012 and July to September 2013, whilst regular pay (excluding bonuses) increased by only 0.8%.  These rates of pay increase are level with the rates reported last month, although inflation has fallen between September and October, from 2.7% to 2.2% on the Consumer Prices Index (CPI).

Time series analysis published by the ONS show that earnings growth (both total and regular pay) has been below the rate of inflation in almost every quarter since in the onset of recession in 2008.

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in October 2013 fell on the previous month, by 41,700, whilst the rate was down 0.1 percentage points to 3.9% (and down 0.8 percentage points on the same month a year earlier).  This is the fifth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to September 2013, 124,000 people were made redundant, unchanged from the previous quarter and with the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the period August to October 2013 increased by 6,000 on the previous quarter to total 545,000.  The number of ILO unemployed adults to every one vacancy in the three months to September 2013 was 4.5, down 0.2 percentage points on the previous quarter.

Key Regional Developments

• Unemployment rates and levels fell compared to the previous quarter in the North East, the West Midlands, the East Midlands, the East of England, and the South East.  The most significant falls were estimated to be in the East and West Midlands, where the number estimated to be unemployed fell by 15,000 in both cases, and the East of England, where the number unemployed fell by 23,000.
• However, unemployment increased significantly on the previous quarter in the South West, by 11,000, and remained broadly flat in the North West, Yorkshire and the Humber, and London .  The highest rate of unemployment continues to be in the North East, at 10.2%.
• In the East Midlands, the unemployment rate fell by 0.8 percentage points to 7.1%, below the national average of 7.6%.  This is equivalent to 166,000 individuals unemployed in the region over the period July to September 2013.
• The employment rate in the East Midlands increased significantly on the previous quarter, by 1.2 percentage points (or 44,000 additional individuals in employment), to 72.4% -  higher than the UK average of 71.8%.
• Prior to the onset of recession in 2008, employment rates in the East Midlands were  consistently estimated to be higher than in the UK, whilst the region had significantly lower than average rates of unemployment.  Through much of the period 2009 to 2012, as employment fell in the region by more than average and unemployment increased at a slightly faster rate, the East Midlands has had employment rates in line or slightly below the UK, and unemployment rates in line or slightly above the UK.    This is the first monthly Labour Market Statistics release in some months to indicate more favourable labour market conditions in the East Midlands than in the UK overall  – although it is important not to rely too heavily on three months’ worth of LFS data, as the sample size is relatively small at a regional level.

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[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.

October 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release for October 2013.   This summarises Labour Force Survey data for the period June to August 2013 and Jobseeker’s Allowance (JSA) claimant count data for September 2013.  Following previous months’ LMS releases, the data published today suggests small but increasingly consistent improvements in the key labour market indicators.   The employment rate increased slightly, by 0.3 percentage points on the previous quarter to 71.7% (reflecting an additional 155,000 individuals in employment), whilst the unemployment rate fell by 0.1 percentage points to 7.7% (with 18,000 fewer individuals defined as unemployed).  Economic inactivity, where individuals are neither employed nor unemployed, has also fallen on the previous quarter.  Finally, the more timely measure of claimant count unemployment fell between September and August, for the fourth consecutive month.

These broadly positive developments are consistent with a range of business survey findings that suggest increasing confidence among employers.  Positive expectations for sales (including exports) have translated into increasing recruitment activity.  For example, the Derbyshire and Nottinghamshire Chamber of Commerce survey for the third quarter of 2013 found a positive balance of firms reporting increased sales in both domestic and export markets and fuller order books compared to the previous quarter, whilst confidence in future profitability and turnover had increased.  

The Bank of England’s Agents’ Report for September 2013 provides further indications of improvements in business conditions, including growth in consumer spending over the summer (associated with the good weather) and increasing confidence amongst borrowers due to the ‘forward guidance’ provided by the Bank that interest rates will remain low.  The Agents’ Report also provides a more positive assessment of the UK construction sector, which had been particularly affected by a steep fall in output and associated job losses following the onset of recession, with indications of strengthening construction output driven by an upturn in house building activity.

However, the October LMS release continues to provide a concerning picture of weak wage growth, with total wages (including bonuses) only 0.7% higher in the period June to August 2013 compared to the same period in 2012.  With higher than expected inflation announced for September, at 2.7% as measured by the CPI, this means that real wages are continuing to fall.  Wage growth has been below the rate of inflation in almost every quarter since the onset of recession in 2008.  The inflation estimate for September is also particularly important, as it is the inflation figure used to calculate Local Authority business rates for the next year.  The Guardian estimates that the current rate of inflation will result in an additional £242 million in business rate payments from high street retailers, potentially putting jobs at risk in this sector.

Unemployment and Employment Rates

LFS data for the three months to August 2013 indicates that the unemployment rate[1] fell slightly on the previous quarter (March to May 2013), by 0.1 percentage points to 7.7% of the economically active population aged 16 and over.  The number unemployed fell by 18,000 on the previous quarter and by 40,000 on the same period a year earlier.  The total number of adults currently estimated to be unemployed is 2.49 million.

The change in the numbers of long-term unemployed has been mixed.  Those who have been unemployed for between 6 and 12 months has fallen slightly on the previous quarter and the same period a year earlier, to a total of 446,000.  The number of people unemployed for over 12 months has fallen slightly on the previous quarter but has increased on the same period a year earlier, to total 900,000.  The number of young people (16-24 year olds) unemployed was estimated to be 958,000.  This is equivalent to 21% of economically active young people, which increased by 0.1 percentage point on the previous quarter. 

The employment rate (for adults aged 16-64) for June to August 2013 increased on the previous quarter, by 0.3 percentage points to 71.7%.  Compared to the same period a year ago, the rate has increased by 0.4 percentage points.  The total number of people in employment was 29.87 million, up 155,000 from the previous quarter and 279,000 on the same period a year earlier.  That this has not resulted in a more significant an increase in the employment rate (those employed as a percentage of the total working age population) is due to the continuing strong growth in the total size of the UK working-age population.

Earnings Estimates

Earnings growth remains weak and below the rate of inflation.  Total pay (including bonuses) increased by only 0.7% between the periods June -August 2012 and June-August 2013, whilst regular pay (excluding bonuses) increased by only 0.8%.  This is significantly lower than the earnings growth estimated for previous quarters: total pay for the 3 months to July 2013 was estimated to be 1.2% on the previous year, whilst total pay growth was estimated to be 2.2% for the 3 months to June 2013. 

Time series analysis published by the ONS show that earnings growth (both total and regular pay) has been below the rate of inflation in almost every quarter since in the onset of recession in 2008.

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in September 2013 fell on the previous month, by 41,700, whilst the rate was down 0.1 percentage points to 4% (and down 0.6 percentage points on the same month a year earlier).  This is the fourth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to August 2013, 132,000 people were made redundant, up 14,000 from the previous quarter but broadly level with the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the period July to September 2013 increased by 6,000 on the previous quarter to total 541,000.  The number of ILO unemployed adults to every one vacancy in the three months to August 2013 was 4.7, down 0.1 percentage points on the previous quarter.

Key Regional Developments

• Unemployment rates and levels fell compared to the previous quarter in the North East, Yorkshire and the Humber, the West Midlands, the East of England, and the South East.  The most significant falls were estimated to be in the West Midlands, with a fall in unemployment of 14,000 individuals and 0.4 percentage points, and the East of England, with a fall in unemployment of 20,000 individuals and 0.7 percentage points.  The East of England had the lowest unemployment rate of the nine English regions in June to August 2013, at 5.9%.
• However, unemployment increased significantly on the previous quarter in the North West and the South West, by 24,000 and 16,000 individuals respectively.  The highest rate of unemployment continues to be in the North East, at 10.3%.
• In the East Midlands, the number unemployed increased very slightly, by 1,000 individuals on the previous quarter, but the unemployment rate remained unchanged, at 7.7% - in line with the UK average.  This is equivalent to 177,000 individuals unemployed in the region over the period June to August 2013.
• The employment rate in the East Midlands also increased slightly on the previous quarter, by 0.2 percentage points (or 5,000 additional individuals in employment), to 71.5% - slightly below the UK average of 71.7%.
• It is possible for both the employment and the unemployment rates to increase at the same time because the number of economically inactive adults (neither employed nor unemployed) has fallen - by 7,000 individuals compared to the previous quarter.  This could be due to individuals who had previously been full-time carers of children or elderly relatives starting to look for work, as well as individuals who had been economically inactive due to illness or disability re-entering the labour market.

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[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.

August 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release for August 2013.   This contains Labour Force Survey data for the period April to June 2013 and Jobseeker’s Allowance (JSA) claimant count data for July 2013.  As in the case of the last two months’ LMS, this month’s data is fairly flat, with a slight increase in the employment rate but no change in the rate of unemployment compared to the previous quarter.  The more timely Claimant Count unemployment has fallen slightly, for the second consecutive month.

Compared to the same period a year earlier, a number of these headline measures have started to indicate more significant improvements in labour market conditions.  There are now 301,000 more individuals employed than a year ago in the UK, and 49,000 fewer individuals unemployed.  The economically inactive population (describing individuals who are neither employed nor unemployed, such as full-time carers, students, and the long-term workless who have given up looking for jobs) has fallen by 105,000 compared to the same period a year ago.

However, earnings growth remains very weak, and significantly lower than the rate of inflation (2.8% on the CPI measure in July).  Total pay (including bonuses) is estimated to have increased by 2.1% since April to June 2012, whilst regular pay (excluding bonuses) is estimated to have increased by only 1.1%. 

An Expert Opinion piece published by NTU today looks at trends in male and female unemployment since the onset of recession in 2008.  This suggests that, although unemployment for both men and women increased significantly between 2008 and 2010, male unemployment subsequently recovered whilst female unemployment has continued to increase for much of the period up to spring 2013. 

This has been particularly notable in the East Midlands, where the rate of unemployment for women (for the period April 2012-March 2013) now slightly exceeds that of men, at 7.8% compared to 7.6%.  Women currently make up 47% of the total number of unemployed adults in the East Midlands, up from 42% before the onset of recession, which is significantly higher than the female share of total unemployment in the UK overall. 

This is likely to be affected by the differing sectoral distribution of male and female employment.  Male employment is relatively evenly distributed across the 6 largest sectors (including construction, manufacturing, and financial & business services) whilst female employment is highly concentrated in just 2 broad sectors, public services (accounting for almost half of all employed women in the East Midlands) and distribution, hotels and restaurants (including retail).  These two areas are likely to have been significantly more affected by public sector cuts and the squeeze on household incomes than other sectors, contributing to the differing experiences of men and women in the labour market.

Unemployment and Employment Rates

LFS data for the three months to June 2013 indicates that the unemployment rate[1] was unchanged from the previous quarter (January to March 2013) at 7.8% of the economically active population aged 16 and over.  The number unemployed fell slightly on the previous quarter, by 4,000, and more significantly on the same period a year earlier, by 49,000.  The total number of adults currently estimated to be unemployed is 2.51 million.

The numbers of long-term unemployed have increased on a number of measures.  The number of adults unemployed for six months to a year has increased slightly, by 1,000, but the numbers unemployed for over a year and for over two years have increased more significantly, from 7,000 and 10,000 respectively compared to the previous quarter.

The employment rate (for adults aged 16-64) for April to June 2013 has increased very slightly on the previous quarter, by 0.1 percentage points to 71.5%.  Compared to the same period a year ago, the rate has increased by 0.4 percentage points.  The total number of people in employment was 29.8 million, up 69,000 from the previous quarter and 301,000 on the same period a year earlier.  That this has not resulted in a more significant an increase in the employment rate (those employed as a percentage of the total working age population) is due to the continuing strong growth in the total size of the UK working-age population.

Earnings Estimates

Earnings growth remains weak and below the rate of inflation.  Total pay (including bonuses) increased by 2.1% between April-June 2012 and April-June 2013, whilst regular pay (excluding bonuses) increased by 1.1%.

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in July 2013 fell on the previous month, by 29,200, whilst the rate was down 0.1 percentage points to 4.3% (and down 0.4 percentage points on the same month a year earlier).

Redundancies and Vacancies

In the three months to June 2013, 123,000 people were made redundant, down 17,000 from the previous quarter and down 28,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the period May to July 2013 increased by 19,000 on the previous quarter to total 533,000.  The number of ILO unemployed adults to every one vacancy in the three months to June 2013 was 4.7, down 0.3 percentage points on the previous quarter.

Key Regional Developments

• Unemployment rates and levels fell compared to the previous quarter in the Yorkshire and the Humber, the East of England, South East and South West.  The most significant falls were estimated to be in the South East, with a fall in unemployment of 25,000 individuals and 0.6 percentage points.  The South East has the lowest unemployment rate of the nine English regions, at 6%.
• However, unemployment increased significantly on the previous quarter in the West Midlands, by 18,000 individuals and 0.7 percentage points, to a rate of 9.9%.  This remains below the rate of unemployment in the North East, at 10.3%.
• In the East Midlands, unemployment has increased very slightly, by 4,000 individuals and 0.1 percentage points compared to the previous quarter.  The unemployment rate in the East Midlands for April to June 2013 is estimated to be 7.9% of economically active adults (equivalent to 181,000 individuals), which slightly exceeds the UK average of 7.8%.
• The employment rate in the East Midlands has also increased, by 8,000 individuals and 0.4 percentage points, to a rate of 71.2%, below the UK average of 71.5%.
•  It is possible for both the employment and the unemployment rates to increase at the same time because the number of economically inactive adults (neither employed nor unemployed) has fallen - by 15,000 individuals compared to the previous quarter.  This could be due to individuals who had previously been full-time carers of children or elderly relatives starting to look for work, with national research suggesting that the continued squeeze on household incomes and the impact of benefit changes has particularly affected women.  

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[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.

June 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release for June 2013.   This contains Labour Force Survey data for the period February to April 2013 and Jobseeker’s Allowance (JSA) claimant count data for May 2013.   As in the case of last month’s LMS, this month’s data is fairly flat, with little change in either the employment or unemployment rates on the LFS-based measures, alongside a slight fall in the more timely claimant count unemployment.

Weak earnings growth remains the preeminent story.  Although estimates of earnings growth in the latest release are higher than the estimates published last month, they remain significantly below the rate of inflation.  Total pay (including bonuses) is estimated to have increased by 1.3% since February-April 2012 and regular pay is estimated to have increased by 0.9%.  Between April 2012 and April 2013, prices were estimated to have increased by 2.4% on the Consumer Prices Index (CPI). 

As we have reported previously, earnings growth has been weak since the recession began in 2008, and has been below the rate of inflation for much of this period.  The Institute for Fiscal Studies (IFS) summarised the findings of three linked studies in a special issue of their ‘Fiscal Studies’ journal, also published today.  In these articles, the IFS observe that real wages fell more significantly than in any comparable five year period, with a reduction in wages in real terms of 6% over the period (prior to the recession, wages in the UK were rising by an average of 2% per annum in real terms). 

One-third of workers experienced nominal wage freezes or cuts between 2010 and 2011 (i.e. individuals staying in the same job experiencing a freeze or reduction in their take-home pay).  A total of 70% of UK workers experienced a real wage decrease, reflecting the fact that inflation has outpaced pay growth. The IFS identify a number of factors behind this.  Reductions in nominal pay for workers staying in the same job have been more likely to occur in smaller companies (with larger firms more likely to lay off workers).  Correspondingly, smaller firms (with fewer than 50 employees) have experienced particularly large falls in productivity – of 7% compared to the pre-recession period, compared to no change in firms employing more than 250 employees.  Investment has also fallen more significantly in smaller firms – who may be more likely to substitute cheaper, low skilled labour for investment in machinery etc., thus pursuing more labour intensive (and thus less productive ) strategies.  Additionally, the UK labour force has continued to grow throughout the period since 2008, due to changes to the state pension age, welfare changes (increasing economic activity amongst single parents, for example), indigenous population growth and net migration – which together may be increasing the supply of workers who are prepared to work for a lower wage. 

Claire Crawford, program director at the IFS, summarized the key messages as follows: "The falls in nominal wages that workers have experienced during this recession are unprecedented, and seem to provide at least a partial explanation for why unemployment has risen less – and productivity has fallen more – than might otherwise have been expected.  To the extent that it is better for individuals to stay in work, albeit with lower wages, than to become unemployed, the long-term consequences of this recession in terms of labour market performance may be less severe than following the high unemployment recessions of the 1980s and 1990s."  However, this rather optimistic interpretation is put in a more negative context when reviewing the detail of the IFS journal articles, which illustrate the full extent of falling productivity compared to previous recessions.  Nearly 5 years after the start of the recession, UK output remains 3% lower than the pre-recession level, whilst it was 15% higher within five years of the start of the recession in the early 1990s and 13% higher than at the start of the recession in the early 1980s.  Moreover, the monthly LMS estimates demonstrate that the labour market impacts for certain groups are severe, including when compared to previous recessions, with youth unemployment remaining close to a record 1 million whilst long-term unemployment continues to increase on a number of measures.

Unemployment and Employment Rates

LFS data for the three months to April 2013 suggest that the unemployment rate[1] was unchanged from the previous quarter (November 2012-January 2013) at 7.8% of the economically active population.  The number unemployed fell slightly on the previous quarter, by 5,000, and more significantly on the same period a year earlier, by 88,000.  The total number of adults currently estimated to be unemployed is 2.51 million.

The number of adults unemployed for up to six months has increased by 18,000 (to 1.2 million), whilst the number unemployed for over a year has increased by 11,000 (to reach 898,000 individuals).  Of these, 458,000 have been unemployed for more than two years, which is an increase of 7,000 on the previous quarter.

The employment rate (for adults aged 16-64) has fallen very slightly on the previous quarter, by 0.1 percentage points to 71.5%.  However, this is up 0.7 percentage points on the same period a year earlier.  The number employed has increased both on the previous quarter and on the year, by 24,000 and 432,000 respectively, to reach a total of 29.76 million.  That this has not resulted in an increase in the employment rate (when compared to the previous quarter) is due to the continuing significant growth in the total size of the UK working-age population and labour force (for the reasons noted by the IFS in the above summary). 

Earnings Estimates

Earnings growth remains weak and below the rate of inflation.  Total pay (including bonuses) increased by 1.3% between February-April 2012 and February-April 2013 whilst regular pay (excluding bonuses) increased by 0.9%.

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in May 2013 fell on the previous month, by 8,600, whilst the rate was unchanged at 4.5% (but down 0.3 percentage points on the same month a year earlier).

Redundancies and Vacancies

In the three months to April 2013, 141,000 people were made redundant, up 9,000 from the previous quarter but down 14,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the period March to May 2013 increased by 19,000 on the previous quarter to total 516,000.  The number of ILO unemployed adults to every one vacancy in the three months to April 2013 was 4.9, down 0.2 percentage points on the previous quarter.

Key Regional Developments

·         Unemployment rates and levels fell compared to the previous quarter in the North West, by 0.8 percentage points and 28,000 individuals, whilst levels fell in Yorkshire and the Humber and the South East, by 2,000 individuals in both cases.

·         Unemployment increased significantly on the previous quarter in the West Midlands, by 19,000 and 0.8 percentage points, in the South West, by 12,000 and 0.4 percentage points, and in the North East, by 4,000 and 0.3 percentage points, whilst remaining flat or increasing very slightly in all other regions.  The unemployment rate in the North East remains the highest of the nine English regions, at 10.1%, followed by 9.4% in the West Midlands.

·         In the East Midlands, unemployment has increased very slightly, by 1,000 individuals and 0.1 percentage points, whilst employment has decreased more significantly, by 10,000 individuals and 0.6 percentage points.  The unemployment rate in the East Midlands for the period February to April 2013 is estimated to be 7.8%, in line with the UK average, whilst the employment rate is estimated to be 71%, below the UK average (of 71.5%).

·         The total size of the labour force (economically active adults), has continued to decline in the East Midlands, with the economically active population falling by 8,000 on the quarter, whilst the number who are economically inactive (neither in work nor unemployed ) has increased by 15,000 on the previous quarter.   This suggests that a significant number of individuals could be moving directly from employment to economic inactivity.

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[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.

May 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release for May 2013.   This contains Labour Force Survey data for the period January to March 2013 and Jobseeker’s Allowance (JSA) claimant count data for April 2013.  Despite the emphasis given in the media to the increase in unemployment (of 15,000 individuals) on the LFS measure compared to the previous quarter, the latest level of unemployment is lower compared to the same period a year earlier.  On balance therefore, this month’s release points to a flatter trend than indicated last month (where unemployed increased more significantly, by 70,000 on the previous quarter).  Unemployment on the more timely claimant count has also fallen slightly on the previous month.  This fairly flat picture is similar for the LFS measure of employment, which has fallen compared to the previous quarter but has increased compared to the same period a year earlier.

Despite these headline indicators appearing flatter compared to last month, there are a number of concerning trends within the data.   The numbers of adults unemployed for over one year and over two years have both increased.  However, the biggest story remains the very weak rate of earnings growth, with annual growth in regular pay remaining at the lowest rate since records began in 2001, at 0.8%.  Total pay, which includes bonuses, has fallen to 0.4%, the lowest since March to May 2008.

 With the Bank of England’s Quarterly Inflation Report also published today, confirming that inflation on the CPI measure has remained at 2.8% (for March 2013), these earnings estimates highlight the very significant squeeze on household incomes.  In his opening remarks at the press conference for the Inflation Report, the outgoing Governor Mervyn King noted that inflation has remained above its 2% target rate for much of the last five years, and earnings growth has remained lower than inflation throughout the last five years.  Furthermore, the Bank of England expect inflation to remain above 2% for the next two years – due to continued external price pressures (e.g. commodities like oil and food produce, imported goods and services and international energy prices) alongside “unusually large increases” in administered or regulated prices (e.g. tuition fees and the impact of increased UK-based energy suppliers’ contributions to the national grid on domestic energy prices).  Although the Governor argued that there was a “welcome change in economic outlook” behind the Bank’s more optimistic predictions for output growth, he also noted the continued weak labour productivity data (currently estimated to be at 2005 levels) which, alongside weak earnings growth, has been a consistent story since we published our first monthly briefing.

Unemployment and Employment Rates

LFS data for the three months to March 2013 indicate that the unemployment rate[1]  has increased by 0.1 percentage point on the previous quarter (the three months to December 2012), to 7.8% of the economically active population.  This is equivalent to an increase of 15,000 individuals.   However, compared to the same period a year earlier, the number of unemployed adults has fallen by 92,000, and the rate has also fallen by 0.4 percentage points.  The number estimated to be unemployed is currently 2.52 million.

The number of adults unemployed for up to six months has increased by 3,000 (to 1.19 million), whilst the number unemployed for over a year has increased by 23,000 (to reach 902,000 individuals).  Of these, 464,000 have been unemployed for more than two years, which is an increase of 21,000 from the previous quarter.

The employment rate (for adults aged 16-64) has fallen on the previous quarter, by 43,000 or 0.2 percentage points, to a rate of 71.4%.  However, this is 0.8 percentage points higher than the same period a year earlier, equivalent to an increase of 434,000 individuals.  The total number of people estimated to be in employment in the UK is 29.71 million.

Earnings Estimates

Earnings growth, which has remained weak for the five years since the onset of recession, is even weaker than reported last month.  Total pay (including bonuses) increased by only 0.4% between January 2012-March 2012 and January 2013-March 2013 (compared to 0.8% reported last month), whilst regular pay (excluding bonuses) increased by 0.8%.   The increase in regular pay is the lowest since comparable records began in 2001.

With inflation on the CPI remaining at 2.8%, prices are continuing to increase at more than twice the rate of earnings – illustrating the sustained squeeze on real household incomes. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in April 2013 fell on the previous month, by 7,300, whilst the rate fell by 0.1 percentage points to 4.5% (and by 0.2 percentage points on the same month a year earlier).

Redundancies and Vacancies

In the three months to March 2013, 140,000 people were made redundant, down 5,000 from the previous quarter and down 32,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the period February to April 2013 increased by 11,000 on the previous quarter to total 503,000.  The number of ILO unemployed adults to every one vacancy in the three months to March 2013 was 5.0, unchanged from the previous quarter.

Key Regional Developments

·         Unemployment rates and levels fell compared to the previous quarter in the North West, by 0.5 percentage points and 18,000 individuals, but increased in all other English regions.

·         Unemployment increased most significantly in the West Midlands, by 0.6 percentage points and 16,000 individuals, and the South West, by 0.6 percentage points and 17,000 individuals.  The North East continues to have the highest unemployment rate of the English regions, at 9.8% of the economically active population, with the West Midlands now exceeding the rate of unemployment in Yorkshire and the Humber (at 9.2% compared to 9%).

·         In the East Midlands, unemployment has increased very slightly, by less than 1,000 individuals and 0.1 percentage points, whilst employment has decreased more significantly, by 19,000 individuals and 0.7 percentage points.  The unemployment rate in the East Midlands for the period January to March 2013 is estimated to be 7.8%, in line with the UK average, whilst the employment rate is estimated to be 70.8%, below the UK average (of 71.4%).

·         The total size of the labour force (economically active adults), has continued to decline in the East Midlands, with the economically active population falling by 19,000 on the quarter, whilst the number who are economically inactive (neither in work nor unemployed ) has increased by 20,000 on the previous quarter.   This suggests that a significant number of individuals could be moving directly from employment to economic inactivity.

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[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.

April 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release for April 2013.   This summarises data from the Labour Force Survey for the period December 2012 to February 2013 alongside Jobseekers’ Allowance claimant count data for March 2013 and recently released (28^th March, 2013) estimates of labour productivity and labour costs for the final quarter of 2012.

With the funeral of former Prime Minister Margaret Thatcher due to take place today, which has resulted in the cancellation of the weekly Prime Minister’s Questions (where the monthly employment statistics are often debated), media interest in this release may be more muted.  However, there is an important change in the data – an increase in unemployment, of 70,000 individuals compared to the previous quarter, which is significantly greater than the slight increase (7,000) reported last month. This has resulted in the unemployment rate increasing by 0.2 percentage points to 7.9%, equivalent to 2.56 million individuals unemployed but actively seeking work.   The employment rate has remained flat, although the number of people in employment has fallen slightly.

This is significant because, until last month’s release, unemployment had been falling quarter-on-quarter since autumn 2011.  Politically, this has been very important to the UK Government because the relative strength of the labour market has been used to counter criticism of their continued commitment to budgetary austerity.  In last month’s briefing, we drew attention to the emphasis placed by Ministers, including the Prime Minister, on continued falls in unemployment.

Alongside the increase in the headline unemployment measure, which has already been reported by the BBC, there have been a number of other developments that point to a possible deterioration in labour market conditions.  Since the start of Financial Crisis and subsequent recession, earnings growth has been consistently lower than the level of inflation (which was estimated to be 2.8% on the Consumer Price Index in March 2013).  The latest estimates suggest that earnings growth has now fallen to its lowest level since autumn 2009, with total pay (including bonuses) increasing by only 0.8% between the periods December 2011-February 2012 and December 2012-February 2013.

Finally, the latest labour productivity data adds to concerns that commentators have held for some time – productivity is continuing to fall although employment has remained relatively stable, meaning that unit labour costs may be becoming unsustainable for many firms.  The Bank of England’s Agents’ Summary of Business Conditions for April, also published this morning, suggests that the annual rate of growth in labour costs has increased slightly amongst Manufacturing employers, and that employers in both Manufacturing and Service sectors were under-utilising available capacity.  According to the quarterly estimates summarised in today’s LMS First Release, output per worker fell by 0.8% between the 3^rd and 4^th quarters of 2012 whilst unit labour costs increased by 0.5% over the same period.  Unit labour costs have now increased in all but one of the quarters since the 4^th quarter of 2010.

Unemployment and Employment Rates

LFS data for the three months to February 2013 indicate that the unemployment rate[1]  has increased by 0.2 percentage points on the previous quarter (the three months to November 2012), to 7.9% of the economically active population. The number estimated to be unemployed has increased by 70,000 on the previous quarter - to a total of 2.56 million.

A key driver in this increase in unemployment has been an increase in the number of people actively engaging in the labour market (i.e. available for work and actively seeking work).  Compared to the previous quarter, the number of people not in the labour force (known as ‘economically inactive’, including full-time students, full-time parents and carers, early retirees, those with work-limiting disabilities and discouraged workers) fell by 57,000.  The main component of this decrease was a reduction in the number of women who were economically inactive because of family commitments (child or elder care).  The number of women economically inactive because of family commitments has fallen to 2.1 million – the lowest figure since comparable records began in 1993.

The employment rate (for adults aged 16-64) has remained flat compared to the previous quarter, at 71.4%, whilst the number of people in employment has fallen slightly, by 2,000.  The total number of people estimated to be in employment is 29.70 million.

Earnings Estimates

Earnings growth, which has remained weak for the five years since the onset of recession, appears to be particularly weak according to the latest estimates.  Total pay (including bonuses) increased by only 0.8% between December 2011-February 2012 and December 2012-February 2013, whilst regular pay (excluding bonuses) increased by 1.0%.  This is lower than the growth reported last month (1.2% for both total and regular pay) and is the lowest annual earnings growth since September-November 2009.

With inflation on the CPI now estimated to be 2.8%, prices are therefore increasing at more than twice the rate of earnings – illustrating the sustained squeeze on real household incomes. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in March 2013 fell on the previous month, by 7,000, whilst the rate remained unchanged, at 4.6% - although this is down 0.2 percentage points on the same month a year earlier.

Redundancies and Vacancies

In the three months to February 2013, 137,000 people were made redundant, down 21,000 from the previous quarter and down 37,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the period January to March 2013 increased by 1,000 on the previous quarter to total 495,000.  The number of ILO unemployed adults to every one vacancy in the three months to February 2013 was 5.2, up 0.1 on the previous quarter – due to the increase in the number of people unemployed.

Key Regional Developments

• Unemployment levels fell compared to the previous quarter in the North West and East Midlands, by 12,000 and 15,000 respectively.
• Unemployment levels and rates increased in all other regions, most significantly in the North East (by 12,000 individuals and 1 percentage point), London (by 30,000 individuals and 0.6 percentage points) and the South West (by 20,000 individuals and 0.7 percentage points).
• The North East continues to have the highest unemployment rate of the English regions, at 10.1% of the economically active population, followed by Yorkshire and the Humber, at 9.2%.
• In the East Midlands, both unemployment and employment fell compared to the previous quarter – with employment falling by 0.4 percentage points to a rate of 71%, below the UK average of 71.4%, and unemployment falling by 0.5 percentage points, to 7.7%, also below the UK average of 7.9%,
• This has happened in the East Midlands because of a decline in the total size of the labour force.  Individuals appear to have moved from unemployment to economic inactivity (with an increase of 26,000 in the economically inactive population), causing a decline in the unemployment rate and number.  Individuals also seem to have left employment and moved into inactivity, with 17,000 fewer people being in work.  

 

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[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.