May 2014 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for May.  This draws on Labour Force Survey data for the period January to March 2014 and Jobseekers’ Allowance claimant data for April 2014.

The key employment and unemployment indicators continue to suggest that the UK labour market is recovering.   Unemployment has fallen to 6.8%, the lowest rate since the three months to January 2009 - although this remains significantly higher than the pre-downturn rate of 5.2% maintained through late 2007 and early 2008.  The number employed has increased to 30.4 million, which is the highest level since comparable records began.  However, due to the rate of population growth in the UK, the employment rate (the proportion of the working age population in employment) remains just below the pre-recession rate – although it is now very close, at 72.7% according to the latest estimate compared to 72.8% in the 3 months to July 2008.

However, the latest earnings estimates (excluding bonuses) continue to lag behind the rate of inflation, increasing by 1.3% compared to the same period in 2013 (with inflation on the Consumer Price Index estimated to be 1.6% over the 12 months to March 2014), although the rate of earnings growth with bonuses is just above inflation at 1.7%.  Commentators in the media have reacted to the earnings estimates with disappointment – with the chief economist at currency exchange specialists World First noting that the ‘squeeze’ on UK household incomes has yet to be alleviated.

Reactions to this morning’s employment data have also been relatively cautious, due to the continued strong increase in self-employment, discussed in last month’s NBS briefing.  Both the Guardian and the BBC have noted that rising self-employment has accounted for a significant share of the overall increase in employment, with the Guardian drawing attention to earlier analysis by the ONS on the nature of recent self-employment.  This ONS analysis, published in February 2014, indicated that the majority (84%) of the increase in the self-employed since 2008 were  workers over 50, who were increasingly likely to be working in low-skill, relatively low-pay roles – described by the TUC as rising proportions of ‘odd jobbers’ rather than small business owners, who may be at risk of unstable incomes and poor job security.

The Bank of England also published their quarterly Inflation Report this morning, in which the Governor welcomed the range of positive developments for the UK economy: stronger output growth, falling unemployment, and inflation below the 2% target rate.  However, concerns about a weak recovery in productivity have led the Bank to believe that the UK continues to have sufficient spare capacity such that “there remains scope to make greater inroads into slack before raising the Bank Rate.”  Therefore the Monetary Policy Committee have voted to maintain interest rates at 0.5%, and any future rise in interest rates will begin gradually and only after improvements in productivity and labour utilisation (both in terms of unemployment and hours worked)  - which continue to be significantly below pre-crisis levels, despite the increasing evidence of strengthening recovery. 

Unemployment and Employment Rates

According to the latest Labour Force Survey, for the period January to March 2014, the unemployment rate[1] fell 0.4 percentage points on the previous quarter to 6.8% of the economically active population aged 16 and over.  The number unemployed fell by 133,000 on the previous quarter to 2.21 million adults.

The number of people unemployed for over one year has also decreased, by 32,000 on the previous quarter (to a total of 813,000). 

Youth unemployment also fell on the previous quarter, by 1 percentage point to 19% of economically active 16 to 24 year olds, equivalent to 868,000 individuals.

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.6 percentage points to 72.7%, which is equivalent to 30.43 million resident adults in employment in the UK (an increase of 283,000 on the previous quarter).   This is the highest number in employment since comparable records began (in 1971), although the rate of employment remains slightly lower than the pre-recession rate (72.8% in the 3 months to July 2008).

A further significant rise in self-employment accounted for a large proportion of the total increase in employment.  The number of employees increased by 351,000 (to reach 25.63 million) and the number of self-employees increased by 375,000 (to reach 4.55 million).  Therefore, although self-employees continue to account for a minority of the total employed workforce, increases in self-employment has accounted for the majority of the increase in total employment for several successive quarters.  Analysis by the ONS published in February 2014 suggests that a large proportion of the newly self-employed are older (50 plus) and are more likely to be working in low-pay, low skill activities (with taxi drivers and landscape gardeners accounting for large proportions) – rather than owner-managers of small businesses.

Earnings Growth

Between January to March 2014 and the same period a year earlier, total pay (including bonuses) rose by 1.7%, just above the rate of inflation (1.6% on the CPI in the 12 months to March).  

However, regular pay (excluding bonuses) rose by 1.3%.   This is up by 0.1 percentage points on the previous quarter and 0.5 percentage points on the rate of regular pay growth a year earlier – but still remains lower than the rate of inflation. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in April 2014 fell on the previous month, by 25,100, whilst the rate was down 0.1 percentage points to 3.3% (and down 1.2 percentage points on the same month a year earlier).  This is the eleventh consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to March 2014, 126,000 people were made redundant, up 15,000 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 three months to April 2014 increased by 45,000 on the previous quarter to total 628,000.  The number of ILO unemployed adults to every one vacancy in the three months to March 2014 was 3.6, down 0.5 on the previous quarter.

Key Regional Developments

• Compared to the previous quarter, unemployment rates and levels fell in eight of the nine English regions – only increasing in the North East (by 5,000 individuals and 0.1 percentage points on the previous quarter).
• Unemployment fell most significantly in the South West, by 41,000 and 1.6 percentage points on the previous quarter -   to the lowest unemployment rate of the nine regions in January to March 2014, at 4.9%.   The North West, Yorkshire and the Humber, the West Midlands and London all also experienced significant falls in unemployment.
• In the East Midlands, unemployment fell by 6,000 individuals and 0.3 percentage points, to a rate of 6.6% - below the UK average of 6.8%.  This is equivalent to 155,000 individuals unemployed in the region during the period January to March 2014.
• Employment increased in the East Midlands, by 15,000 individuals and 0.5 percentage points, to a rate of 73% - above the UK average of 72.8%.  The number and proportion who are economically inactive (neither employed nor unemployed, such as full-time students and carers, early retirees, and ‘discouraged workers’ who have stopped actively seeking work) has fallen in the East Midlands, by 7,000 and 0.2 percentage points – to an economic inactivity rate of 21.6% - below the UK average of 21.8%.  These small differences between the East Midlands and the relevant national averages are unlikely to be statistically significant, so it is more accurate to state that the region is currently broadly in line with the UK average on these key labour market indicators.

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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 2014 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for April.  This draws on Labour Force Survey data for the period December 2013 to February 2014 and Jobseekers’ Allowance claimant data for March 2014.

There have been expectations that this morning’s LMS would indicate that pay levels are increasing at a greater rate than general price inflation for the first time in almost five years.  Yesterday it was announced that inflation had fallen to 1.6% on the Consumer Price Index for the 12 months to March 2014 (down from 1.7% for February).  This is the sixth consecutive monthly fall and the third month in which inflation was below the Bank of England’s 2% target rate.  A survey of economists undertaken on behalf of Reuters predicted that pay growth would exceed inflation, with an average prediction of 1.8%.   Some of this morning’s headlines projected an end to ‘the cost of living crisis’, and an associated “blow to Labour’s economic strategy”.

The latest estimates do not quite indicate wage growth outstripping inflation.   Total pay, which includes bonuses, did increase by 1.7% in the three months to February 2014 compared to the same quarter a year earlier, but ‘regular pay’, which excludes bonuses, increased by 1.4% - which remains slightly lower than the current estimate of inflation on the CPI.  This does indicate a significant increase on previous estimates of earnings growth, and is the highest rate of regular pay growth since the three months to February 2012.  However, on the basis of a single monthly estimate, it is premature to suggest that the squeeze on household income affecting the UK since the onset of recession in 2008 has come to an end.    During this period, there has been a sustained and significant decline in earnings in real terms.  Therefore it will be some time before there is a noticeable improvement, although the latest estimates could indicate a beginning of a recovery in living standards.

Other key labour market indicators in today’s release also indicate continued improvements.  The unemployment rate fell by 0.2 percentage points on the previous quarter to 6.9%.  This is below the 7% level  originally  identified by the Governor of the Bank of England in summer 2013 as a threshold at which point the Monetary Policy Committee may consider increasing interest rates.  This forward guidance has since been revised to include a broader set of measures of economic performance.   However, the rate of unemployment remains higher than the pre-downturn level of 5.2% that was maintained through late 2007 and early 2008.

Conversely, the rate and number employed has increased, although the increase in the number of employees continues to be outstripped by the number entering self-employment, raising continued concerns about ‘necessity entrepreneurship’ – individuals becoming self-employed because they have been unable to secure paid employment.  In analysis published on Monday, the TUC estimated that 44% of the net increase in the numbers employed  since 2010 has been due to self-employment, 40% of which are working part-time.   The authors of this analysis fear that it indicates an increasing number of ‘odd jobbers’ who may become locked in a cycle of low pay, low skill work with unreliable hours and limited protection (sick pay, holiday pay, etc.).

Unemployment and Employment Rates

According to the latest Labour Force Survey, for the period December 2013 to February 2014, the unemployment rate[1] fell by 0.2 percentage points on the previous quarter to 6.9% of the economically active population aged 16 and over.  The number unemployed fell by 77,000 on the previous quarter, to a total of 2.24 million adults.

The number of people unemployed for over one year has also decreased, by  32,000 on the previous quarter (to a total of 807,000). 

Youth unemployment also fell on the previous quarter, by 0.9 percentage points to 19.1% of economically active 16 to 24 year olds, equivalent to 881,000 individuals.

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.4 percentage points to 72.6%, which Is equivalent to 30.39 million resident adults in employment in the UK (an increase of 239,000 on the previous quarter).

A further significant increase in self-employment accounted for a large proportion of this total increase.  The number of employees increased by 99,000 (to 25.6 million) whilst the number self-employed increased by 146,000 on the previous quarter (to reach 4.5 million).  TUC analysis of LFS data since 2010 notes that increasing levels of self-employment have been observed through much of the period, and raise concerns around the nature of new self-employment.    Their analysis suggests that:

• Over the period April to June 2010 to November to January 2013, the number of employees has increased by a total of 656,000 (a 2.6% increase over the period) whilst the number self-employed has increased by 540,000 (a 13.8% increase).  Self-employment has therefore accounted for 44% of the total increase in the numbers of adults in employment since mid-2010; 
• Within the increase in self-employment, the number of those working part-time has increased by 22.3% (compared to a 10.8% increase in the number of self-employed working full-time);
• Older workers (50+) have made up 50% of the overall increase in self-employment; and
• Those working as Sub-contractors and Freelancers have increased by the largest amount, followed by those Working for Themselves -  with the number of self-employed working as Partners Running a Business decreasing very significantly.

Separate research by the Resolution Foundation found that the median earnings of the self-employed fell significantly following the onset of recession, to a median annual salary of £12,000 in 2010  – which is close to the minimum wage.  Together these developments suggest that, rather than a significant increase in people starting new companies as Ministers have suggested, recovery in the labour market remains fragile with many people moving into casualised, relatively insecure, low pay/low hours self-employment. 

Earnings Growth

Estimates of earnings  growth in the latest LMS do show a significant increase compared to previous quarters, although it is not quite true to say that earnings growth has unequivocally exceeded the rate of general price inflation (1.6% on the CPI in the 12 months to March).   Between the periods December 2012 to February 2014 and December 2013 to February 2014, total pay (including bonuses) rose by 1.7%, just above the rate of inflation. 

However, regular pay (excluding bonuses) rose by 1.4%.   This is the highest rate of growth in regular pay since the period December 2011 to February 2012 (which was 1.6%) and is up by 0.2 percentage points on the previous quarter – but still remains slightly lower than the rate of inflation. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in March 2014 fell on the previous month, by 30,400, whilst the rate was down 0.1 percentage points to 3.4% (and down 1.2 percentage points on the same month a year earlier).  This is the tenth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to February 2014, 117,000 people were made redundant, up 5,000 from the previous quarter but down 20,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to March 2014 increased by 38,000 on the previous quarter to total 611,000.  The number of ILO unemployed adults to every one vacancy in the three months to February 2014 was 3.8, down 0.3 percentage points on the previous quarter.

Key Regional Developments

Unfortunately earnings estimates are only published at UK national level in the monthly LMS, so it is not possible to comment on sub-national variations in earnings growth rates.  This will be possible when the 2014 Annual Survey of Hours and Earnings is published in November.

• Compared to the previous quarter, unemployment rates and levels fell in six English regions, but increased in Yorkshire and the Humber, the East Midlands and the West Midlands. 
• Unemployment increased most significantly in the East Midlands, by 14,000 on the previous quarter, to a total of 163,000 adults aged 16 and over who are unemployed in the region.  The unemployment rate increased by 0.6 percentage points to 7% - which is slightly higher than the national average.
• Employment in the East Midlands fell, by 12,000 individuals, resulting in a slight fall of 0.1 percentage point in the employment rate, to 72.4% (slightly lower than the national average).  Unemployment increased by a greater amount than the corresponding fall in employment because of a fall in economic inactivity (people who are neither employed or unemployed – i.e. not able to work or actively seeking work).  Therefore, compared to the previous quarter, a significant number of individuals in the East Midlands are likely to have moved from economic inactivity to unemployment (able to work and actively seeking work).
•  The most significant falls in unemployment were in the South West, where the numbers unemployed fell by 51,000 (whilst the rate decreased by 1.9 percentage points) and the North East, where the numbers fell by 10,000 (and the rate by 0.9 percentage points).   However, the North East continues to have the highest rate of unemployment of the nine English regions, at 9.3%.

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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.

March 2014 Labour Market Statistics Briefing

This morning, prior to the Chancellor of the Exchequer’s 2014 Budget speech, the Office for National Statistics published the Labour Market Statistics (LMS) release for March.  The Government, the Opposition and commentators in the media will pay particular attention to both the employment trends and earnings estimates, indicating the extent of wider recovery in the labour market but also whether the ‘cost of living crisis’ (the Opposition’s term for the sustained period of sub-inflation earnings growth) is likely to significantly improve prior to the General Election in spring 2015.  The Government, including the Prime Minister, have already greeted this morning’s data as a sign that their ‘long term economic plan’ is working, whilst the Opposition continue to draw attention to the earnings element of the ONS release.

The latest LMS summarises Labour Force Survey (LFS) data for the period November 2013 to January 2014, and Jobseeker’s Allowance (JSA) claimant data for February 2014.  Following confusion in the media over last month’s release, the ONS have clarified their guidance that the employment and unemployment rates from the latest 3 month period published in each successive monthly LMS should only be compared to the previous non-overlapping 3 months included in the same LMS publication, rather than the rate published in the previous LMS release (which will include 2 months’ overlapping data).  This additional clarification is important as the latest unemployment rate has fallen to 7.2% on the previous non-overlapping quarter (7.4% in August to October 2013) but is level with the rate published in February’s LMS (for the period October to December 2013).  Although the ONS clearly state that unemployment has fallen on the previous non-overlapping quarter, and that last month’s published rate is not directly comparable “as the labour Force Survey is not designed to measure monthly changes”, City commentators quoted in this morning’s news continue to make this comparison - somewhat inaccurately suggesting that unemployment has “held steady” at 7.2%.

Alongside the fall in unemployment, both the number employed and the employment rate have increased - although the ONS report that this was driven entirely by a significant increase in the number self-employed, with a fall in the number of employees.  This raises concern around the sustainability of recovery beneath these headline figures, with earlier analysis by the ONS and the TUC suggesting that recent increases in self-employment may indicate ‘necessity entrepreneurship’.  This describes individuals potentially ‘trading down’ on their skills, indicated by the higher proportions of recently self-employed individuals in lower skill occupations compared to those who became self-employed prior to the onset of recession in 2008.

Finally, earnings data in the latest LMS indicates an increase in annual earnings growth compared to previous periods, with regular pay (excluding bonuses) increasing by 1.3% on the previous 12 months.  This remains lower than the current rate of inflation (1.9% on the Consumer Prices Index) – but the gap between earnings growth and inflation has narrowed.  However, there is a significant gap between public and private sector pay, with regular pay for individuals working in the private sector increasing by 1.6% over the year, compared to only 0.6% for those working in the public sector.

Unemployment and Employment Rates

According to the latest Labour Force Survey data (for November 2013 to January 2014), the unemployment rate[1] fell by 0.2 percentage points on the previous quarter, to 7.2% of the economically active population aged 16 and over.  The number unemployed fell by 63,000 on the previous quarter  (August to October 2013).  The total number of adults who are estimated to be unemployed is 2.33 million.

The number of people unemployed for over one year has also decreased, by  38,000 on the previous quarter (to a total of 828,000). 

Youth unemployment also fell on the previous quarter, by 0.7 percentage points to 19.8% of economically active 16 to 24 year olds, equivalent to 912,000 individuals.

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.3 percentage points to 72.3%, equivalent to 30.19 million resident adults in employment in the UK (an increase of 105,000 on the previous quarter).

This increase was entirely driven by self-employment.  The number of employees fell by 60,000 (to 25.5 million) whilst the number of self-employed individuals increased very significantly on the previous quarter, by 211,000 (to reach 4.5 million).

Earnings Estimates

Earnings growth remains below the rate of general price inflation, although the gap has narrowed compared to previous periods.  Between the periods November 2012 to January 2013 and November 2013 to January 2014, total pay (including bonuses) rose by 1.4% and regular pay (excluding bonuses) by 1.3%.  General price inflation on the Consumer Prices Index is currently 1.9%.

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in February 2014 fell on the previous month, by 34,600, whilst the rate was down 0.1 percentage points to 3.5% (and down 1.1 percentage points on the same month a year earlier).  This is the ninth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to January 2014, 117,000 people were made redundant, down 2,000 from the previous quarter and down 15,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to February 2014 increased by 23,000 on the previous quarter to total 588,000.  The number of ILO unemployed adults to every one vacancy in the three months to January 2014 was 4.0, down 0.3 percentage points on the previous quarter.

Key Regional Developments

• Compared to the previous quarter, unemployment rates and levels fell in five English regions, but increased in the North West, the East Midlands and the East of England.  In Yorkshire and the Humber, the number unemployed increased slightly, but the unemployment rate remained stable compared to the previous quarter, at 8.7%.
• The most significant falls in unemployment were in the South East and the West Midlands, where the numbers unemployed fell by 24,000 and 19,000 respectively, and the unemployment rates fell by 0.6 percentage points in both cases.  The lowest unemployment rate of the nine regions was in the South East, at 5.2%.
• The North East continues to have the highest rate of unemployment of the nine regions, at 9.5%, although this fell by 0.6 percentage points on the previous quarter.  The largest increase in unemployment was experienced in the North West, where 22,000 additional individuals were estimated to be unemployed compared to the previous quarter, with the rate increasing by 0.6 percentage points to 8.1%.
• In the East Midlands, the unemployment rate was 7%, up 0.1 percentage points on the previous quarter, although this remains slightly lower than the average for the UK (7.2%).  This is equivalent to 164,000 individuals unemployed according to the ILO definition, up 2,000 on the previous quarter.  The employment rate fell slightly, by 0.1 percentage points to 72.6% - above the average for the UK (72.3%).

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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.

February 2014 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for February 2014.  This summarised Labour Force Survey (LFS) data for the final three months of 2013 and Jobseeker’s Allowance (JSA) claimant data for January 2014.  This release indicates further improvements in the headline labour market indicators.  The exception continues to be earnings growth, which remains weak and well below the rate of inflation, despite the Consumer Price Index measure of inflation falling to 1.9% in January, below the Bank of England’s target rate of 2% for the first time in four years. 

Additionally, the latest data suggests continuing issues of under-employment, with relatively high proportions of people stating that they are working temporarily or part-time because they cannot find permanent or full-time work.  Such concerns underpin the Bank of England’s revised Forward Guidance announced with the Inflation Report last week.

The employment rate and number employed increased compared to the previous quarter, whilst the unemployment rate fell compared to the previous quarter, to 7.2%.  There has been some misunderstanding of this in the press, with newspapers reporting an increase in unemployment when compared to the rate published in January’s LMS (7.1%).    The ONS recommend against comparing successive monthly LFS-based estimates due to the data overlap.  For example, the data published last month covered the period September to November, the data this month covers the period October to December.  In each of this periods, the unemployment rate fell compared to the previous non-overlapping quarter (e.g. June to August and July to September respectively).  On this basis, according to the latest release, the unemployment rate fell by 0.4 percentage points between the period July to September and October to December 2013.

The number and rate of unemployment-benefit claimants has fallen on the previous month.  The JSA claimant rate has now fallen every month since May 2013.  However, welfare reform has dominated the news over the last few days, especially following the live televised debate on welfare on Channel 4 on Monday that coincided with the final episode of the controversial ‘Benefits Street’ reality TV show and interventions from the leader of the Roman Catholic Church in England, the archbishop of Westminster Vincent Nichols.

During the televised debate, commentators on the left, such as author and columnist Owen Jones and Huffington Post political editor Mehdi Hasan, highlighted the relatively large share of the welfare budget attributed to people in work but on low incomes.  They identified low pay and/or part-time or zero hours employment alongside rapid rises in private rents as areas that required urgent attention from the Government.  Although not directly disputing the share of the total welfare bill paid to those in work, those on the right, including columnist Allison Pearson and DWP Minister Mike Penning, strongly advocated the view that work was the best way out of poverty and that incentivising benefit claimants into work would significantly reduce the welfare bill (as well as furthering a ‘moral mission’, according to David Cameron in an article in the Telegraph today).

This morning, the DWP published their quarterly statistical summary of key benefit payments, which enables some exploration of these arguments.  In August 2013, there were 5.4 million working-age claimants accessing either out-of-work benefits or in-work income support. The largest proportion claimed Employment and Support Allowance (which replaced Incapacity Benefits and the Severe Disablement Allowance in 2008), accounting for 45% of total working-age claimants (2.4 million).   JSA claimants accounted for 23% of the total (1.3 million claimants).  The remainder, 1.7 million, received benefits that could be claimed by those in work, such as lone parent or carers’ support, other Income Support, and Disability Living Allowance.  

However, these figures do not include Housing Benefits.  These are paid via Local Authorities to those on low income (whether working or out-of-work) to cover part or all of ‘reasonable’ weekly rents for their area,  and reported  by the DWP separately.  Of the 5 million Housing Benefit claimants, 3.7 million were working-age.  Of these, over a million Housing Benefit claimants were in employment and not on other ‘passported benefits’ (benefits that individuals eligible for other means-tested benefits, such as JSA, may also be entitled to, such as Income Support).  When looking specifically at new Housing Benefit claims registered since 2010 -  the vast majority of new claimants (over 90%) were in work.

So in summary, the Government are right to highlight the high proportion of working-age benefit claims because of illness or disability, but JSA accounts for a relatively small proportion of total working-age claimants (less than a quarter).  This total does not include Housing Benefits – where almost a third of working-age claimants were employed.  A final point to add is that, by focussing on working-age claimants, this analysis explicitly excludes state pensions which, according to the DWP’s annual report, accounted for 49% of the total national welfare budget (excluding administration costs), with Housing Benefit the next largest share, at 11%.  JSA claimants counted for only 0.4% of the total welfare budget in the 2012-13 financial year.

Unemployment and Employment Rates

According to the latest Labour Force Survey data (for October to December 2013), the unemployment rate[1] fell by 0.4 percentage points on the previous quarter, to 7.2% of the economically active population aged 16 and over.  The number unemployed fell by 125,000 on the previous quarter  (July to September 2013).  The total number of adults who are estimated to be unemployed is 2.34 million.

The number of people unemployed for over one year has also decreased, by  45,000 on the previous quarter (to a total of 845,000). 

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.3 percentage points to 72.1%, equivalent to 30.15 million resident adults in employment in the UK (an increase of 193,000 on the previous quarter).  Within this increase, the number of self-employed people increased strongly (by 172,000).  Previous analysis, that shows an increasing proportion of self-employed in lower-skill occupations since the onset of recession, suggests that this trend could be a cause for concern.  A significant number of these individuals could be ‘necessity entrepreneurs’, entering self-employment having failed to secure a job, and being vulnerable to low pay, casualised and low hours work.

Earnings Estimates

Earnings growth remains weak and below the rate of general price inflation, despite a fall in the CPI rate to 1.9% in the 12 months to January 2014 (below the Bank of England’s 2% inflation target for the first time since November 2009).  Total pay (including bonuses) rose by 1.1% and regular pay (excluding bonuses) by 1% between the periods October to December 2012 and October to December 2013. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in January 2014 fell on the previous month, by 27,600, whilst the rate was down 0.1 percentage points to 3.6% (and down 1 percentage point on the same month a year earlier).  This is the eighth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to December 2013, 111,000 people were made redundant, down 13,000 from the previous quarter and down 34,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to January 2014 increased by 28,000 on the previous quarter to total 580,000.  The number of ILO unemployed adults to every one vacancy in the three months to December 2013 was 4.1, down 0.4 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 the South West.  The most significant falls were in the West Midlands and the South East, where the numbers unemployed fell by 31,000 and 37,000 respectively whilst the rates fell by 1.2 and 0.8 percentage points.
• The North East continues to have the highest rate of unemployment of the nine regions, at 10%, although this fell by 0.2 percentage points on the previous quarter.  In the South West, the unemployment rate increased by 0.1  percentage points to 6.5%.
• In the East Midlands, the unemployment rate was 6.9%, equivalent to 162,000 individuals unemployed according to the ILO definition, compared to 7.2% in the UK.   Compared to the previous quarter, unemployment in the East Midlands fell by 0.2 percentage points and 4,000.  Employment increased slightly, by 7,000 individuals and 0.1 percentage points to a rate of 72.6%, above the UK average of 72.1%

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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.

January 2014 Labour Market Statistics Briefing

On Wednesday morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release.   This summarised Labour Force Survey data for the period September to November 2013 and Jobseeker’s Allowance (JSA) claimant data for December 2013.   This release indicated further improvement in headline labour market indicators, including a more significant fall in the unemployment rate than predicted by many commentators.

The number employed increased on the last quarter and is the highest on record.  Although the employment rate also increased, it remains  below the pre-recession peak.  This continues to demonstrate that, although the number of people in jobs has been increasing quarter-on-quarter, the total size of the UK resident population is also increasing significantly, due to both natural change and migration.

The unemployment rate fell by 0.5 percentage points on the quarter to 7.1%.  This has prompted considerable coverage in the media, as the rate has now fallen close to the 7% threshold identified in the Bank of England’s forward guidance as the point at which the Monetary Policy Committee (MPC) would consider raising interest rates.  This point has been reached sooner than expected when Governor Mark Carney announced the forward guidance following his appointment last summer.

However it is important to emphasise a couple of points.  Firstly, the nature of forward guidance.  An unemployment rate of 7% does not represent a trigger after which the Bank will automatically increase interest rates.  The unemployment rate is one of a number of indicators, collectively representing the overall health of the economy, which the MPC will monitor and may then start to consider  whether or not to increase interest rates.  Mark Carney has since confirmed that a rate rise is not being considered in the short-term.  As we noted in last month’s briefing, the Bank is keen to avoid premature speculation around rate rises which could pose a significant threat to the sustainability of the recovery.  It is now possible that the Bank will announce a change in their forward guidance, perhaps adjusting the loose threshold from 7% to 6.5%, in order to adjust to faster than expected strengthening of the labour market.

Secondly, it is important to note that the unemployment rate and the number unemployed remain significantly higher than pre-recession levels.  At the start of 2008, the unemployment rate was just over 5%, 2 percentage points lower than currently, whilst the number unemployed was 1.6 million, compared to 2.3 million unemployed according to the latest data.   Weak wage growth, again evident in the latest data, alongside continued concerns about under-employment and relatively low labour productivity (output per hour fell between quarter 2 and 3 of 2013) are key factors that also threaten the sustainability of recovery.  Also of interest is the extent of geographical variation in the strength and pace of recovery across the UK.  This week’s labour market data shows that, although unemployment fell in every English region except for the South West, trends in the number and rate of employment were very varied.  The two midlands regions experienced significant increases in employment compared to small increases in the North West and Yorkshire and falls in both the employment number and rate across the southern regions.

Unemployment and Employment Rates

According to the latest Labour Force Survey data (for September to November 2013), the unemployment rate[1] fell by 0.5 percentage points on the previous quarter, to 7.1% of the economically active population aged 16 and over.  The number unemployed fell by 167,000 on the previous quarter  (June to August 2013).  The total number of adults who are estimated to be unemployed is 2.32 million.

The number of people unemployed for over one year has also decreased, by  61,000 on the previous quarter (to a total of 839,000). 

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.5 percentage points to 72.1%, equivalent to 30.15 million resident adults in employment in the UK (an increase of 280,000 on the previous quarter).

Earnings Estimates

Earnings growth remains weak and below the rate of inflation.  Total pay (including bonuses) and regular pay (excluding bonuses) both increased by only 0.9% between the September to November 2012 and September to November 2013.

This rate of earnings growth remains lower than the rate of inflation, despite the fall in inflation in December 2013 to 2% on the Consumer Prices Index (CPI) - the lowest rate since November 2009 and a return to the target rate set by the Treasury.   Therefore, despite inflation being ‘on target’, weak pay growth means that earnings are still being squeezed in real terms.

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in December 2013 fell on the previous month, by 24,000, whilst the rate was down 0.1 percentage points to 3.7% (and down 0.9 percentage points on the same month a year earlier).  This is the seventh consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to November 2013, 112,000 people were made redundant, down 21,000 from the previous quarter and down 47,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to December 2013 increased by 22,000 on the previous quarter to total 569,000.  The number of ILO unemployed adults to every one vacancy in the three months to November 2013 was 4.1, down 0.5 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 the South West.  The most significant falls were in the East and West Midlands, where the numbers unemployed fell by 28,000 and 32,000 respectively whilst the rates fell by 1.3 percentage points in both cases.
• The North East continues to have the highest rate of unemployment of the nine regions, at 10.3%, although this fell by 0.1 percentage points on the previous quarter.  In the South West, the unemployment rate increased by 0.5 percentage points to 6.8%.
• In the East Midlands, the unemployment rate was 6.4%, equivalent to 149,000 individuals unemployed according to the ILO definition.  Employment in the East Midlands increased significantly, by 49,000 individuals and 1.1 percentage points, to a rate of 72.6% - above the UK average of 72.1%.  As in the case of the UK, the number of people in employment in the East Midlands now exceeds the pre-recession peak, at 2.2 million, but the rate remains below -  as the employment rate in the East Midlands consistently exceeded 73% through 2007 and 2008.

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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.

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.