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.

---

[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.  

 

---

[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.

March 2013 Labour Market Statistics Briefing

On the morning that the Chancellor will be delivering the Budget for 2013-14, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release for March 2013.   This contains Labour Force Survey data for the period November 2012 to January 2013 and Jobseekers’ Allowance claimant data for February 2013.  Media and political interest will be significant if there is any change to the recent story of slightly rising employment and falling unemployment, especially as Ministers (including the Prime Minister in a speech on the UK economy on the 7^th March) have been drawing attention to the relative strength of the UK labour market in the run-up to the budget.

The March 2013 release does not contain any huge shocks for the Chancellor.  The number in employment and the employment rate have increased slightly, compared to both the previous quarter and the same period a year earlier.  This is consistent with the trend observed since autumn 2011.   The number of people economically inactive (neither employed nor unemployed) was down, and the more timely JSA claimant count was also down slightly on the previous month.  However, the story from the wider Labour Force Survey measure of unemployment was less positive than in previous LMS releases: although the unemployment rate was unchanged from the previous quarter, the number of people unemployed has increased by 7,000.  Wage estimates continue to illustrate the underlying weakness in the wider economy – with total and regular (excluding bonuses) pay rising by only 1.2% compared to the same period a year earlier – lower than the wage growth reported last month, and well below the rate of inflation on the Consumer Price Index (2.7%), indicating the continued squeeze on household incomes. 

Additionally, youth unemployment has increased quite significantly on the previous quarter and long-term unemployment has also increased on a number of measures.

Although the increase in total unemployment on the LFS measure has been relatively small (and insufficient to affect the rate of unemployment), the timing of this has affected coverage in the press, with the BBC running a headline that presents the unemployment increase as one of a number of factors putting “pressure” on the Chancellor.   However, in light of the unfolding crisis in Cyprus and its wider implications for the Single Currency alongside the range of announcements that will accompany the Budget, it is unlikely that this development in the labour market will remain in the headlines for long.

Unemployment and Employment Rates

LFS data for the three months to January 2013 indicate that the unemployment rate[1]  has remained unchanged from the previous quarter (the three months to October 2012), at 7.8% of the economically active population.  However, the number estimated to be unemployed has increased, by 7,000 on the previous quarter to a total of 2.52 million.

Long-term unemployment has increased on a number of measures: for those unemployed between 6 and 12 months (up 5,000) and those unemployed for over 2 years (up 2,000).  Those who have been unemployed for over one year (but less than 2 years) has fallen by 16,000 on the previous quarter, but the number of individuals unemployed for up to six months has increased by 18,000.

The number of 16-24 years olds who are unemployed increased by 48,000 on the previous quarter, meaning that the youth unemployment rate increased by almost 1 percentage point to 21.2%.

The employment rate (for adults aged 16-64) increased by 0.3 percentage points on the previous quarter, to 71.5%.  The total number of people estimated to be in employment is 29.73 million, up 131,000 on the previous quarter.   The employment rate is 1.1 percentage points higher than the same period a year earlier, although it remains lower than its pre-recession peak of 73% (March-May 2008).

Earnings Estimates

Average UK earnings growth continues to be very weak, with both total (including bonuses) and regular pay (excluding bonuses) rising by only 1.2% between the periods November 2011-January 2012 and November 2012-January 2013, slightly down on the growth rates of 1.3% for both measures published last month (for the periods October-December 2011 and October-December 2012).

Although employment continues to rise, UK workers also continue to experience reductions in real-terms pay (with the rate of inflation currently estimated to be 2.7% on the CPI measure), pointing to sustained pressure on real household incomes.  The weak increase in regular pay reported in the March LMS is the lowest since the end of 2009. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in February 2013 fell very slightly on the previous month, by 1,500, whilst the rate remained unchanged from December and January, at 4.7%.

Redundancies and Vacancies

In the three months to January 2012, 133,000 people were made redundant, down 14,000 from the previous quarter and down 40,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the period December 2012-February 2013 increased by 2,000 on the previous quarter to total 494,000.   The number of ILO unemployed adults to every one vacancy in the three months to January 2013 was 5.1, compared to 5.2 in the previous quarter.

Key Regional Developments

• Unemployment levels fell compared to the previous quarter in the East Midlands, the East of England and London – most significantly in London, by 17,000 individuals and 0.5 percentage points. 
• Unemployment levels and rates increased compared to the previous quarter in the North East, Yorkshire and Humber, the West Midlands, the South East and the South West – with the most significant increase in the South East, by 16,000 individuals and 0.3 percentage points.   However, the North East continues to have the highest unemployment rate of the English regions, at 9.8% of the economically active population, followed by Yorkshire and the Humber, at 9%.
•  In the East Midlands, both unemployment and employment levels fell compared to the previous quarter.  This is possible due to an increase In the economically active population (of 14,000 on the previous quarter).  Employment fell by 7,000 (0.2 percentage points) in the East Midlands on the previous quarter to a rate of 71.5%, level with the UK average.   Unemployment also fell by 7,000 (also 0.2 percentage points) to a rate of 7.7%, just below the UK average of 7.8% (but not sufficiently different to be statistically significant).

 

---

[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.

February 2013 Labour Market Statistics Briefing

The Office for National Statistics’ Labour Market Statistics (LMS) release for February 2013 includes Labour Force Survey data for the final three months of 2012 and Jobseekers’ Allowance (JSA) data for January 2013.  The ONS have also summarised recent analysis of public and private sector employment and comparisons between the UK, US and EU labour markets.   The latest LFS data for the UK shows an increase in employment, by 154,000 individuals compared to the previous quarter (July-September 2012) and a decrease in unemployment, by 14,000 individuals.  Claimant count unemployment has also fallen, by 12,500 in January 2013 compared to December 2012.  

Commentators in the media have reacted positively, with the Guardian describing the increase in employment as ‘huge’ (although this latest increase is less than previously seen in a number of quarters in 2011 and 2012).  The BBC have also commented very positively on the latest data, although they have placed more emphasis on continued weak earnings growth (which is still well below the rate of inflation, a consistent picture since mid-2008).  The BBC quote CIPD chief economist John Philpott: “Where we're seeing the weakness in the labour market and in the UK economy is on the pay side…  People are having to price themselves into jobs.  The economy is producing the same amount of output with far more people - that is called falling productivity." 

No new productivity estimates have been published within the February LMS, but the slight increase in output per worker reported in last month’s briefing does not significantly affect the picture of weak or falling productivity and rising unit labour costs observed throughout 2012.

The number of people employed in the public sector fell by 324,000 across the UK between September 2011 and September 2012 whilst the number of private sector jobs increased by 823,000.  However, a significant proportion of this change reflects the re-classification of a range of educational bodies from public to private sector (accounting for approximately 200,000 of the fall in public sector employment and the increase in private sector employment respectively). 

International comparisons show that unemployment in the UK increased much more slowly between 2007 and 2009 than in either the US or the EU.  In the UK, unemployment peaked at around 8% of economically active adults in early 2009 and then remained fairly stable, whilst unemployment in the US peaked at 10% in 2009 before stabilising then recovering through 2010-12.  However, unemployment across the EU has continued to increase –  to 10.7% in December 2012, compared to 7.8% in both the US and UK.  Greece had the highest unemployment rate in the EU, at 26.8% (October 2012) whilst Austria had the lowest rate, at 4.3% (December 2012).

Unemployment and Employment Rates

LFS data for the three months to December 2012 indicate that the unemployment rate[1]  has fallen by 0.1 percentage points on the previous quarter, to 7.8% of the economically active population, which is equivalent to 2.5 million individuals.  This is 14,000 lower than the previous quarter and 156,000 lower than the same period a year earlier.   However, the number of young people (16-24 year olds) who are unemployed increased, by 11,000 on the previous quarter to reach 974,0000 (20.8% of the economically active population in that age band).

Long-term unemployment (adults unemployed for more than one year) fell by 15,000 compared to the previous quarter, to a total of 879,000 individuals across the UK.

The employment rate (for adults aged 16-64) increased by 0.3 percentage points on the previous quarter, to 71.5%.  The total number of people estimated to be in employment is 29.73 million, up 154,000 on the previous quarter.   The employment rate is 1.1 percentage points higher than the same period a year earlier, although it remains lower than its pre-recession peak of 73% (March-May 2008).

Full-time employment increased by 197,000 on the previous quarter whilst the number of people in part-time employment fell by 43,000.  This is equivalent to 73% of employed adults working full-time and 27% working part-time.  Compared to the same period a year earlier (the three months to December 2011), the number of people working full-time increased by 394,000 – the largest annual increase since 2005.  However, this has not yet offset the decrease in full-time employment experienced during the 2008-09 recession.  The number of individuals in full-time employment is currently estimated to be 378,000 lower than in the first quarter of the 2008-09 recession, April-June 2008. 

Earnings Estimates

Average UK earnings growth continues to be very weak, with regular pay (excluding bonuses) rising by only 1.3% between the last quarter of 2012 and October-December 2011.  Total pay (including bonuses) has risen by only 1.4% over the same period.  These rates of growth are lower than those reported last month (in the January LMS) and reported in both the November and December LMSs.  Although employment continues to rise, UK workers also continue to experience reductions in real-terms pay (with the rate of inflation currently estimated to be 2.7% on the CPI measure), pointing to sustained pressure on real household incomes.  The weak increase in regular pay reported in the latest LMS is the lowest since the end of 2009. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in January 2013 fell slightly on the previous month, by 12,500 across the UK, whilst the rate remained unchanged from December, at 4.7% (December’s rate has been revised down from 4.8% reported in last month’s briefing).

Redundancies and Vacancies

In the three months to December 2012, 145,000 people were made redundant, up 17,000 from the previous quarter, but down 19,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to January 2013 was 487,000 -  up 1,000 compared to the previous quarter and up 24,000 on the same period a year earlier.  The number of ILO unemployed adults to every one vacancy in the three months to December 2012 has fallen to 5.1, compared to 5.2 in the previous quarter.

Key Regional Developments

• Unemployment levels fell compared to the previous quarter in the North East, Yorkshire and the Humber, London and the South West – most significantly in London, by 10,000 individuals and 0.3 percentage points.  The North East continues to have the highest unemployment rate of the nine English regions, at 9.7%, followed by Yorkshire and the Humber, at 8.9%.
• Unemployment levels increased in the North West, the West Midlands, and the South East – most significantly in the South East, by 6,000 individuals and 0.1 percentage points.
• In the East Midlands, employment levels increased very slightly, by 5,000 individuals compared to the previous quarter – although the rate has remained flat, at 71.4%, which is slightly lower than the national average (71.5%), but is not sufficiently different from the average to be statistically significant. Unemployment levels in the East Midlands decreased very slightly on the previous quarter, by 1,000 individuals, but the unemployment rate has also remained flat – at 7.7%, slightly lower than the national average (7.8%), but, again, not sufficiently different to be statistically significant.

---

[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.

January 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics for January 2013, which covers Labour Force Survey data for the period September to November 2012 and Jobseekers’ Allowance (JSA) claimant data for December 2012.  A very slight increase in employment and a small decrease in unemployment point to a flatter trend than earlier in 2012.  Increases in employment reported in previous months have been significantly greater.  On balance, the labour market between September to November 2012 and the previous quarter could be described as broadly flat, with a few interesting exceptions.  

In contrast to earlier in 2012, when part-time jobs were largely responsible for the net increases in employment, the latest data indicates a stronger increase in full-time employment compensating for a small fall in part-time employment.  

In previous briefings, we have also drawn attention to falling labour productivity (output per worker) and increasing labour costs – together supporting the view that employers were ‘hoarding’ excess labour, a strategy that may become unsustainable in the future if demand does not increase.  However, the latest data indicates a slight increase in output per worker and a slight fall in labour costs.  These estimates (for Quarter 3 of 2012) coincide with a period of overall output growth (with Q3 GDP growth estimated to be 0.9%).  Various survey evidence published recently, such as data from the Purchasing Managers’ Index published just before Christmas, indicate a significant fall in service sector activity at the end of 2012, strongly suggesting that the final quarter of the year could see a return to negative growth – meaning that the slight increase in output per worker and fall in labour costs could be short-lived

Weak earnings growth has been observed through most of 2012, with previous data releases indicating below inflation rates of earnings growth.  The latest data is consistent with this, indicating that regular pay (excluding bonuses) rose by only 1.4% between September-November 2012 and the same period a year earlier, compared to the latest CPI inflation estimate of  2.7%.

Media coverage of today’s data has generally been positive, with the BBC drawing attention to continued falls in Jobseekers’ Allowance claimants, to reach the lowest level since June 2011, alongside falls in long-term unemployment on the Labour Force Survey measure.  However, a slight increase in youth unemployment has also been picked up in the press coverage – notable given the rate and number of 16-24 year olds classed as unemployed had previously been falling since early 2012.

Unemployment and Employment Rates

LFS data for the three months to November 2012 indicate that the unemployment rate[1]  has fallen by 0.1 percentage points on the previous quarter, to 7.7% of the economically active population, which is equivalent to 2.49 million individuals.  This is 37,000 lower than the previous quarter and 185,000 lower than the same period a year earlier.   However, the number of young people (16-24 year olds) who are unemployed increased very slightly, by 1,000 on the previous quarter, to reach 957,000 (20.5% of the economically active population in that age band).

Long-term unemployment (adults unemployed for more than one year) fell by 5,000 compared to the previous quarter, to a total of 892,000 individuals across the UK.

The employment rate (for adults aged 16-64) increased slightly, by 0.1 percentage points on the previous quarter, to 71.4%.  The total number of people estimated to be in employment is 29.68 million, up 90,000 on the previous quarter.   The employment rate is 1.1 percentage points higher than the same period a year earlier, although it remains lower than its pre-recession peak of 73% (March-May 2008).

Full-time employment increased by 113,000 on the previous quarter whilst the number of people in part-time employment fell by 23,000.  However, despite this recent fall, over the year there has been a strong increase in part-time employment, with 95,000 more men and 144,000 more women working part time in September to November 2012 compared to the same period in 2011.

Earnings Estimates

Earnings estimates continue to point to weak growth in average pay levels, with regular pay (excluding bonuses), rising by only 1.4% between August to October 2011 and August to October 2012, whilst total pay (including bonuses) increased by 1.5% over the same period.  This increase is lower than that reported in previous months (for example, the November 2012 Labour Market Statistics estimated a 1.9% increase in regular pay), suggesting that although employment continues to rise, UK workers also continue to experience reductions in real-terms pay (with the rate of inflation currently estimated to be 2.7% on the CPI measure).

Labour Productivity and Unit Labour Costs

In contrast with previous data releases, the amount of (inflation adjusted) output per worker increased slightly, by 0.6%, between the second and third quarters of 2012.  This coincided with the period in which the overall output of the UK economy was estimated to grow by 0.9%.  Conversely, unit labour costs are estimated to have  fallen very slightly over the same period, by 0.1%.

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in December 2012 fell slightly on the previous month, by 12,100 across the UK, whilst the rate remained unchanged from previous months, at 4.8%.

Redundancies and Vacancies

In the three months to November 2012, 158,000 people were made redundant, up 27,000 from the previous quarter but down 6,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to December 2012 was 494,000 -  up 10,000 compared to the previous quarter and up 33,000 on the same period a year earlier.  The number of ILO unemployed adults to every one vacancy in the three months to November 2012 has fallen to 5.1, compared to 5.3 in the previous quarter.

Key Regional Developments

•        The level of unemployment fell compared to the previous quarter in the North East, Yorkshire and the Humber, London and the South West – most significantly in London, by 26,000 and 0.6 percentage points, and the North East, by 10,000 and 0.8 percentage points.  However, the North East continues to have the highest unemployment rate of the nine English regions, at 9.1%, followed by the West Midlands, at 8.9%.
•       Unemployment levels increased in the North West, the East Midlands, the West Midlands, the East of England, and the South East – most significantly in the East Midlands, by 10,000 individuals and 0.4 percentage points, and the West Midlands, by 13,000 individuals and 0.3 percentage points.
•       In the East Midlands, employment also fell slightly on the previous quarter, by 3,000 individuals or 0.5 percentage points.  The overall employment rate in the East Midlands for the period September to November 2012 was level with the UK average, at 71.4%, whilst the unemployment rate was higher, at 8.2% compared to 7.7%.   With the exception of London (with an unemployment rate of 8.3%), the latest data indicates a very clear north-south divide, with the five Midlands and Northern regions all having unemployment rates in excess of 8%, whilst the East of England, the South West and South East all have unemployment rates below 7%.

---

[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.

2012: UK Economic and Labour Market Overview

This post briefly summarises the main developments affecting the UK economy and labour market through 2012, drawing from a range of official data published over the last 12 months. 

The last year has been another difficult year for the UK.  A combination of weak conditions in the global economy, and in the eurozone in particular, and weak domestic expenditure mean that growth in the UK has been flat during the last year.

The global economy has weakened during the past year.  In its recent Economic Outlook, the OECD suggests that growth has fallen in the major emerging countries of Brazil, India and China in 2012.  Growth has increased slightly in the United States while the EU has contracted.   The OECD expects the EU to continue to act as a drag on global growth in 2013[1].  Within the EU the slowdown in growth in the peripheral economies has started to spread to the core, with sharp declines in growth expected in the major eurozone economies of Germany and France this year.  The crisis in the eurozone has yet to be fully resolved and this remains the key risk to the global economy.  However there are concerns that failure to agree a programme of fiscal consolidation in the USA (the so-called “fiscal cliff”) could also have a major impact on the prospects for the global economy in 2013. 

Domestically, the UK entered recession in the final quarter of 2011, and growth contracted until the third quarter of 2012.  Changes in GDP on a quarter-by-quarter basis have been particularly hard to interpret during the past year as a result of a number of one-off events such as the Olympic Games and the Diamond Jubilee.  However it is the case that in the third quarter of 2012 GDP was unchanged from a year earlier[2].  Over the course of the year growth in service sector activity has been offset by declines in production and construction.  Despite some positives in the labour market and a decline in inflation during the year, earnings growth remain weak, dampening consumer expenditure.

There has been much debate throughout the year over the ‘puzzle’ of the relative stability of the UK labour market in light of the weak economic conditions described above.  The last monthly Labour Market Statistics of the year[3] indicated a slight increase in employment alongside a more significant fall in unemployment.  Employment has now been rising and unemployment falling consistently since the autumn of 2011.  This appears particularly puzzling when compared to previous recessions.  During the recent recession, output fell much more steeply than in the recessions of the early and late 1970s and the early 1990s whilst employment fell by much less.  Between the first quarter of 2008 and the second quarter of 2009, real GDP fell by 6.3% whilst employment fell by just 2%.[4] 

Below inflation wage growth provides one explanation, with UK employees accepting real-terms wage reductions for much of the period since 2008 in order to limit job losses.  However, there are a number of other trends which could indicate continued and deep weaknesses in the labour market.  These include increases in part-time employment than have significantly outstripped recovery in full-time jobs, which could indicate an increasing level of ‘underemployment’.  This is supported by record levels of Labour Force Survey respondents stating that they are working part-time purely because they have been unable to find full-time employment.   Continuing falls in labour productivity alongside rising unit labour costs have been equally concerning, pointing to employers ‘hoarding’ more labour than required to meet the current low levels of demand for goods and services.  This could indicate a risk that, if demand does not start to increase significantly, employment could begin to fall in early 2013 as it ceases to be sustainable for firms to ‘hoard’ this excess capacity.

---

[1] OECD, November 2012. ‘Economic Outlook No 92.’  Paris: OECD.

[2] ONS CROWN COPYRIGHT, ‘November 2012. Second Estimate of GDP, Q3 2012.’  London: TSO.

[3] ONS CROWN COPYRIGHT, 2012. ‘Labour Market Statistics, December 2012’. London: TSO.

[4] ONS CROWN COPYRIGHT, 2012. ‘The Productivity Conundrum, Explanations and Preliminary Analysis’. London: TSO.

November 2012 Labour Market Statistics Briefing

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.