August 2012 Labour Market Statistics Briefing

The Office for National Statistics published the monthly Labour Market Statistics First Release this morning, which reports on Labour Force Survey data for the period April to June 2012 and Jobseekers’ Allowance (JSA) data for July. As in the last three months’ releases, unemployment has fallen on the Labour Force Survey measure. However, this month, the more timely JSA claimant count measure has also fallen slightly – suggesting a level of stability in the UK labour market over the spring/summer.

Unfortunately, this stability is likely to be relatively short-lived. The ONS estimate that UK employment levels are now only 96,000 below the pre-recession peak (in the period March-May 2008) but output is continuing to contract (by 0.7% in the second quarter of 2012). Unemployment remains high, at 2.6 million on the Labour Force Survey measure and weak earnings growth (total pay increased by only 1.6% on the previous year) illustrates the on-going squeeze on household incomes for those who are in employment. For example, the ONS published data yesterday showing that inflation rose in July to 2.6% on the Consumer Price Index, from 2.4% in June. This surprised many commentators, including the Governor of the Bank of England, who had predicted steady falls in inflation through the rest of 2012. This increase was driven by sharp rises in the cost of air travel in the run-up to the Olympics and higher food prices, due to poor harvests (especially in the US), and with rising oil and petrol prices threatening future inflation increases.

But it is the picture of UK productivity performance that raises questions about future labour market performance. Compared to previous recessions, unemployment has not increased as significantly, whilst output (in GDP) has fallen to a lower level, and for a longer period, than at any time since the 1930s. This is because, despite steep falls in production, UK employers have tended to ‘hoard’ labour – in anticipation of recovery and in order to retain technical and specialist skills. According to a the quarterly Labour Market Outlook Survey published earlier this week by the Chartered Institute of Personnel and Development (CIPD ), almost a third of the private sector firms who responded (31% of just over 1,000 employers) have maintained staff levels higher than is required for the level of output they produced during the past year. Furthermore, 62% of firms felt that they would be forced to cut back on labour if output or service delivery does not pick up in the next year. Today’s release from the ONS includes estimates of labour productivity, which illustrates the impact of this retention of spare capacity. In the first quarter of 2012, output per hour worked was estimated to be 1.3% down on the previous quarter – contributing to an increase of 1.4% in unit labour costs. Any sustained recovery in demand could be some time coming as gloomy economic news continues to emerge, including the estimate published yesterday that output in the Eurozone contracted by 0.2% in the second quarter of 2012, alongside emerging weakness in Asia and an uncertain recovery in North America. Continued declines in UK output means that labour retention may be increasingly unsustainable and future falls in employment should not be unexpected.

Unemployment and Employment Rates

LFS data for the three months to June 2012 indicate that the unemployment rate

has fallen by 0.2 percentage points on the previous quarter, to 8% of the economically active population, which is equivalent to 2.56 million individuals. This is 46,000 lower than the previous quarter. However, this is up 0.1 percentage points (or 51,000 individuals) compared to the same period a year earlier. Long-term unemployment continues to increase, with the number of people out of work for more than a year up to 882,000 (an increase of 1,000 compared to the previous quarter). The number of young people (16-24 year olds) remains above 1 million, although it has fallen 4,000 on the previous quarter.

The employment rate (for adults aged 16-64) increased by 0.4 percentage points on the previous quarter, to 71%. The total number of people estimated to be in employment is now 29.5 million, up 201,000 on the previous quarter. This is 96,000 lower than the pre-recession peak of 29.6 million (March-May 2008). Both full-time and part-time employment increased, by 130,000 and 71,000 respectively.

Earnings Estimates

Earnings estimates continue to point to very weak growth in average pay levels, with regular pay (excluding bonuses), rising by only 1.8% between the three months to June 2012 and the same period a year earlier. Total pay (including bonuses) increased by 1.6% - broadly unchanged on the earnings growth estimates published estimated for last quarter.

Job Seekers’ Allowance Claimants

Jobseekers’ Allowance (JSA) claimants in July 2012 fell by 5,900 on the previous month, to reach 1.6 million. However, compared to the same month a year earlier, claimant count unemployment has increased by 35,600. The claimant count rate was 4.9%, unchanged from previous months but up 0.1 percentage points on the same period a year earlier.

Redundancies and Vacancies

In the three months to June 2012, 150,000 people had become redundant, down 21,000 from the previous quarter and down 4,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to July 2012 was 472,000 up 10,000 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 has fallen to 5.4, compared to 5.7 in the previous quarter.

Key Regional Developments

 

Despite falling in the UK overall, unemployment increased in Yorkshire and the Humber, the East Midlands and the West Midlands, by 0.8, 0.5, and 0.3 percentage points respectively. The largest increase in absolute terms was in Yorkshire and the Humber, with 25,000 more people unemployed than in the previous quarter.

The biggest decreases in unemployment were experienced in the North East (down by 0.9 percentage points) and the South West (by 0.7 percentage points). However, the North East continues to have the highest rate of unemployment on the ILO measure out of the nine English regions, at 10.4%.

In the East Midlands, unemployment increased by 10,000 individuals, reaching 193,000 individuals. The ILO unemployment rate in the region is currently above the UK average, at 8.3%, following successive quarters where unemployment in the East Midlands has been lower than the national level.

June 2012 Labour Market Statistics Briefing

This morning, the Office for National Statistics published their monthly Labour Market Statistics First Release – which includes Labour Force Survey data for the period February to April 2012 and Jobseekers’ Allowance data for May.  As in the last two months’ releases, unemployment has fallen on the Labour Force Survey measure.  However, this month’s data appears to be more widely positive than previously, with increases in both part-time and full-time employment (previous increases in total employment have been entirely driven by part-time employment).  The number of women in employment has also increased in this month’s estimates (increases in total employment in previous months have been mainly driven by rising male employment).

Despite this more positive picture, the UK labour market continues to be a concern.  Overall unemployment remains at a high level, at 2.6 million people, whilst the number of people unemployed for more than six months continues to increase.  Self-employment has also increased to the highest level since records began (in 1992), which, as discussed in one of our recent blog posts, is likely to include increasing levels of ‘necessity entrepreneurship’ – individuals being forced into self-employment, often in low pay, low skill activities, due to not being able to find a job.  Also of concern is the increase in the more timely measure of Jobseekers’ Allowance claimants, which  could indicate that the labour market is now weaker than the LFS data suggests.

Earnings growth remains very weak and is still significantly lower than the rate of inflation, despite yesterday’s news that inflation has fallen to 2.8% on the CPI.

Unemployment and Employment Rates

LFS data for the three months to June 2012 indicate that the unemployment rate[1]  has fallen by 0.2 percentage points on the previous quarter, to 8.2% of the economically active population.  This is equivalent 2.61 million individuals, 51,000 less than the previous quarter. However, the unemployment rate is still 0.5 percentage points higher than the same period one year earlier - and remains at the highest level since autumn 1996.  The number of unemployed men fell by 49,000 compared to the previous quarter, and the number of unemployed women fell only slightly, by 1,000 –  consistent with the picture of women being more adversely affected by recent developments than men, which we discussed in more detail in our briefing on April’s ONS release.

Youth unemployment (16-24 year olds) was also down 0.6 percentage points on the previous quarter to 21.9%.    This is equivalent to 1.01 million 16-24 year olds unemployed.

The employment rate (for adults aged 16-64) increased by 0.3 percentage points on the previous quarter, to 70.6%.  The number of people estimated to be in employment is now thought to be 291,000 lower than the pre-recession peak of 29.6 million (March – May 2008).  Unlike previous months, where total increases in employment were entirely or mainly driven by part-time jobs, this latest data suggests that the number of full-time workers has increased by 82,000 on the previous quarter.   However, this has still been exceeded by an increase in part-time employment of 83,000.  Therefore the number of people in part-time jobs because they cannot find full-time employment remains at a record level, at 1.4 million.  Self-employment has also increased in the three months to April, by 84,000 on the previous quarter, and now stands at 4.2 million – the highest level since comparable records began in 1992.

Earnings Estimates

Earnings estimates continue to point to very weak growth in average pay levels, with regular pay (excluding bonuses), rising by only 1.8% between the three months to April 2012 and the same period a year earlier – although this is up slightly (0.2 percentage points) on the growth reported last month.

Job Seekers’ Allowance Claimants

Jobseekers’ Allowance (JSA) claimant unemployment for May 2012 increased by 8,100 on the previous month, to reach 1.6 million.  This also represents an increase of 96,300 on the same period a year earlier.  The claimant count rate was 4.9%, unchanged from the previous month (but 0.3 percentage points higher than the same period a year earlier).

Redundancies and Vacancies

In the three months to April, 155,000 people had become redundant, down 18,000 from the previous quarter and but up 39,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to May 2012 was 465,000, up 1,000 compared to the previous quarter and up 7,000 on the same period a year earlier.  The number of ILO unemployed adults to every one vacancy has remained unchanged from the previous quarter, at 5.7.

Key Regional Developments

•     Despite falling in the UK overall, unemployment increased in the North East and North West (where it increased by 0.5 and 0.1 percentage points respectively on the previous quarter).
•     The biggest decreases in unemployment were experienced in the West Midlands (where the rate fell by 0.7 percentage points on the previous quarter and 18,000 people) and London (by 0.5 percentage points and 20,000 people).  However, unemployment rates remain above the national average in both these regions, at 8.4% and 9.7% respectively.
•         In the East Midlands, unemployment fell by 1,000 individuals (or 0.2 percentage points), and remains below the national average at 8%.  The employment rate in the East Midlands increased by 1 percentage point, or 28,000 individuals, and remains higher than the national average at 71.9%.

Local Developments

·      In Nottingham City, claimant count unemployment decreased by 187 between April and May 2012, to 14,327 individuals (6.5% of working age residents).  However, the number of claimants in the city is 1,265 higher than in May 2011.  In Nottinghamshire County, the number of claimants also fell by 356, to 17,356 individuals (3.5% of working age residents).  Again, the level for May 2012 is significantly higher than the same month a year earlier (1,629 more individuals compared to May 2011).

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[1] According to the International Labour Organisation (ILO), this is defined as those who are out of work but available for, and actively looking for, employment within a set period.  This is expressed as the proportion of ‘economically active’ (employed plus unemployed) adults.

May 2012 Labour Market Statistics Briefing

On the 16th of May, the Office for National Statistics published their monthly Labour Market Statistics First Release – which includes Labour Force Survey data for the period January-March 2012 and Jobseekers’ Allowance data for April.   As in last month’s release, unemployment has fallen on the Labour Force Survey measure, but this month it has also fallen on the more timely claimant count measure.  These latest estimates received a relatively muted reception in the media.  This was partly due to the fact that they were published alongside news of the accelerating crisis in the Eurozone, following the failure of Greek politicians to form a government.   Media commentators and politicians also exhibited caution because of the nature of the data itself – as the increases in employment were entirely driven by part-time jobs, with the number of  people working full-time falling compared to the previous quarter.  This suggests that the UK labour market remains relatively week, and it remains premature to point to recovery with any certainty.

Commenting on the data in the Guardian, Jonathan Portes, Director of the National Institute of Social and Economic Research (NIESR), justified this caution, observing that, “the net increase in the number of people in employment is primarily the result of fewer people leaving or losing jobs, rather than more people being hired; this suggests that workers are prepared to accept lower pay or fewer hours as an alternative to being laid off.”  John Philpott, chief economic advisor at the Chartered Institute of Personnel and Development (CIPD), also suggested to the BBC that lower wage costs and an increased availability of casual, part-time work may explain why unemployment has not continued to increase, despite declining output during the same quarter.

Unemployment and Employment Rates

LFS data for the three months to March 2012 indicate that the unemployment rate has fallen by 0.2 percentage points on the previous quarter, to 8.2% of the economically active population.  This is equivalent 2.63 million individuals.[1]  However, the unemployment rate is still 0.5 percentage points higher than the same period one year earlier - and remains at the highest level since autumn 1996.  The number of unemployed men fell by 42,000 compared to the previous quarter, whilst the number of unemployed women fell only slightly, by 3,000 –  consistent with the picture of women being more adversely affected by recent developments than men, which we discussed in more detail in our briefing on last month’s data.

The employment rate (for adults aged 16-64) increased by 0.2 percentage points on the previous quarter, to 70.5%.  However, as also reported in our briefing last month, the latest data again indicates that an increase in part-time employment, of 118,000, masked a fall in full-time employment, of 13,000.  The number of people working part-time because they cannot find a full-time job remains at its highest level since comparable records began in 1992, at 1.42 million. 

Earnings Estimates

Earnings estimates continue to point to very weak growth in average pay levels, with regular pay (excluding bonuses), rising by only 1.6% between the three months to March 2012 and the same period a year earlier, less than half the current rate of inflation.

Job Seekers’ Allowance Claimants

The more timely measure of Jobseekers’ Allowance (JSA) claimant unemployment for April 2012 fell by 13,700 compared to the level in March 2012.  This is the largest fall since July 2010, taking the total count of JSA claimants to 1.59 million, which is equivalent to 4.9% of adults.  Despite the fall in absolute numbers, the rate is unchanged from the previous month (and is 0.3 percentage points higher than the same period a year earlier).

Redundancies and Vacancies

In the three months to March, 172,000 people had become redundant, up 7,000 from the previous quarter and up 49,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to April 2012 was 457,000, down 7,000 compared to the previous quarter and down 12,000 on the same period a year earlier.  Because of the fall in ILO unemployment, there has been a slight fall in the number of unemployed adults to every one vacancy compared to the previous quarter, from 5.8 to 5.7.

Key Regional Developments

• Despite falling in the UK overall, unemployment increased in the North East and North West (where it increased by 0.3 and 0.4 percentage points respectively on the previous quarter), and the South West (by 0.4 percentage points), and remained flat in London and the South East.
• The biggest decreases in unemployment were experienced in Yorkshire and the Humber (where it fell by 0.9 percentage points or 24,000 individuals) and the West Midlands (falling by 0.8 percentage points and 19,000 individuals).  However, unemployment rates remain above the national average in both these regions, at 9% and 8.5% respectively.
• In the East Midlands, unemployment fell by 6,000 individuals (or 0.4 percentage points), and remains below the national average at 7.8%.  The employment rate in the East Midlands increased by 1 percentage point, or 32,000 individuals, and remains higher than the national average at 72.1%.

Source: ONS Crown Copyright, 'Labour Market Statistics, May 2012', 16 May, 2012

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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 2012 Labour Market Statistics Briefing

On the 18th of April, the Office for National Statistics published the latest monthly Labour Market Statistics, which covers Labour Force Survey Data for the period December 2011 to February 2012 and Jobseekers’ Allowance claimant data for March 2012.  This release was accompanied by the recent news that inflation, on the Consumer Price Index, has increased to 3.5% (after falling for 5 consecutive months).  Therefore, there has been a lot of attention paid to the ONS’ earnings growth estimates, the cost of living and the prospects of any recovery in consumer spending. 

Unemployment and Employment Rates

LFS data for the three months to February 2012 suggests that the unemployment rate has fallen by 0.1 percentage points on the previous quarter, to 8.3%.  This is equivalent to a fall of 35,000 in the number of economically active adults unemployed according to the ILO definition – to reach 2.65 million individuals. [1] This is the first quarterly fall in unemployment since March-May 2011. 

However, the number of unemployed women in the three months to February 2012 increased by 8,000 to reach 1.14 million – which is the highest level since the three months to November 1987.  Overall unemployment fell because the number of men who were unemployed fell by 43,000 (to reach 1.51 million).  The gender difference in unemployment could be associated with the significant falls in public sector employment, which accounts for activities where women are known to be overrepresented (e.g. local government, health and education).

The number of people unemployed for more than 12 months reached the highest level since the three months to September 1996.

The employment rate (for adults aged 16-64) increased slightly on the previous quarter, by 0.1 percentage points to 70.4%.   This increase was due to a strong increase in the number of individuals employed part-time, by 80,000 to reach 7.9 million.   This masked the fall in full-time workers, by 27,000. As in previous quarterly releases, the number of people working part-time because they cannot find a full-time job remains at its highest level since comparable records began in 1992, at 1.4 million. 

This data led the BBC to draw attention to ‘underemployment’, quoting  Mike Fetters, Director of Totaljobs.com, saying that the statistics: "flatter to deceive… whilst on the surface they look rosier than those of the past few months, they hide a number of concerns - not least the staggeringly high levels of underemployment.” 

Earnings Estimates

Concern about the cost of living dampened media responses to the fact that unemployment fell.  In the three months to February 2012, total pay (including bonuses) rose by only 1.1 per cent on a year earlier, down 0.2 on the three months to January 2012.  Regular pay (excluding bonuses) rose by only 1.6 per cent on a year earlier, unchanged on the three months to January 2012.  The Guardian drew significant attention to these estimates, stating that weak earnings growth alongside stubbornly high inflation would seriously undermine the Office for Budgetary Responsibility’s forecast for recovery in 2012 – which was partly based on an expectation that consumer confidence would increase through the year due to falling inflation and rising wage growth. 

The increase in inflation to 3.5% in March was largely due to rising food and clothing prices, but the end of five months of consecutive falls in inflation has led many commentators to speculate that inflation may now stay above 3% through 2012, in contrast to previous expectations that it would fall below the 2% target by the end of the year.  Paul Tucker, deputy head of the Bank of England, stated that "in the near term there is considerable uncertainty about the path that it will follow". 

Job Seekers’ Allowance Claimants

In contrast to the fall in quarterly ILO unemployment, the more timely measure of claimant count unemployment for March 2012 increased compared to the previous month, by 3,600 to reach 1.61 million – equivalent to 4.9% of adults aged 16 and over.  This is unchanged from the previous month but up 0.4 percentage points on the same period a year earlier.

Redundancies and Vacancies

In the three months to February, 174,000 people had become redundant, up 11,000 from the previous quarter and up 47,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to March 2012 was unchanged from the three months to December 2011, at 464,000, but down 19,000 on the same period a year earlier.

Key Regional Developments

·         The number of people who were unemployed fell in most regions, with the exception of the North West (where it increased by 0.6 percentage points on the previous quarter), the East of England and the South West (by 0.2 percentage points respectively).  

·         Unemployment fell the most in Yorkshire and the Humber, by 0.9 percentage points and 21,000 individuals – although the overall rate of unemployment in the region remains significantly higher than the national average, at 9.3% compared to 8.3%.

·         In the East Midlands, unemployment fell very slightly, by 1,000 individuals (or 0.1 percentage points), and remains below the national average at 8.2%.  The employment rate in the East Midlands increased by 0.4 percentage points, or 7,000 individuals, and remains higher than the national average at 71.5% compared to 70.4%.

Source: ONS Crown Copyright, Labour Market Statistics, April 2012.

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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 2012 Labour Market Statistics Briefing

On the 14th of March, the Office for National Statistics published both the latest monthly Labour Market Statistics and the estimates of Public Sector Employment for the final quarter of 2011.  The Labour Market Statistics includes Labour Force Survey data for the period November 2011 to January 2012 and Jobseekers’ Allowance data for February 2012.  The data indicates an increase in the International Labour Organisation (ILO) measure of unemployment to the highest level since November 1995.  However, for the third consecutive release, there has been a slight increase in the numbers in employment - which was principally driven by an increase in part-time employment (with the number of self-employees falling).[1] 

Public sector employment in the final quarter of 2011 is estimated to be 270,000 lower than the same period a year earlier. The largest share of job losses was estimated to be from local government (down by 204,000 on the same period a year earlier).[2]

Compared to the broadly optimistic reaction from city analysts and political commentators to last month’s release, reactions this month appear to be more muted, with many analysts accepting that a significant improvement in labour market conditions appears unlikely in the short-term.    The Guardian ran a feature contrasting the views of various analysts, in which most emphasised the current high level of unemployment in the UK and the consistently poor figures over previous months – characterised by significant falls in public sector employment and only weak increases in private sector jobs (Blerina Uruci, Barclays Capital).  Furthermore, a  number of these analysts appeared to agree that a fall in unemployment was unlikely until early 2013 (e.g. Nida Ali, Ernst & Young Item Club). 

The Government has continued to argue that the data is “encouraging”  - with Employment Minister Chris Grayling MP identifying “signs that the labour market is stabilising” in an interview with the BBC.  In criticising the Government’s presentation of the latest data, organisations such as the TUC have drawn attention to the recent increases in individuals working part-time because they have been unable to find full-time employment, suggesting that this provides evidence of persistent underlying weaknesses in the UK labour market.  These developments are explored in more detail below.

Unemployment and Employment Rates

LFS data for the three months to January 2012 suggests that the unemployment rate has increased by 0.1 percentage point on the previous quarter to reach 8.4% of economically active adults in the UK overall.[3]   The ONS note that this rate is the highest since the three months to November 1995.  However, the increase in the number of unemployed on the previous quarter, at 28,000, has been lower than increases reported in previous Labour Market Statistics (and is the lowest quarterly increase since the three months to May 2011).  This is the development that has led Government spokespeople to argue that the trend in unemployment could be stabilising.  However, it is important to note that the level of unemployment  -  at 2.67 million individuals - is higher than at any point in 2011.

A strong message in the latest data, as reported by the BBC, has been the increase in unemployment amongst women.  The number of unemployed women in the three months to January 2012 increased by 22,000 on the previous quarter, compared to an increase of 5,000 for unemployed men.  Although men still make up the majority of ILO unemployment (1.54 million), women have accounted for the largest share of recent increases in unemployment.  This could well be associated with the significant falls in public sector employment, described below, which accounts for activities where women are known to be overrepresented (e.g. local government, health and education).

The employment rate remained unchanged compared to the previous quarter, at 70.3%.  The number of people employed increased by 9,000 on the quarter to reach 29.12 million (although this is still 44,000 lower than the same period a year earlier).   This slight increase on the quarter was mainly due to 60,000 more employees working part-time.  Alongside a small increase in full-time employees of 3,000, this increase in part-time working compensated for a significant fall in self-employment of 52,000 and a small fall in unpaid family workers.   As reported in last month’s briefing, a high and growing number of individuals (1.38 million) state that they are working part-time because they have been unable to find full-time work.

Public Sector Employment

The separate release of Public Sector Employment estimates for the final quarter of 2011 strongly suggests that local government employees have borne the brunt of public sector job cuts.  In the fourth quarter of 2011, total public sector employment was 270,000 lower than the same period a year earlier – at 5.94 million.  Local government employment was 204,000 lower than in the final quarter of 2010 (a decrease of 7.1%), compared to a fall of 34,000 in central government, including the NHS (1.2%), and a fall of 32,000 in public corporations (6.1%).

Job Seekers’ Allowance Claimants

The proportion of Job Seekers’ Allowance (JSA) claimants in the UK in February 2012 was 5.0% of adults aged 16 and over, which is unchanged from the previous month but is 0.5 percentage points higher than the same period a year earlier.  This is equivalent to 1.6 million adults claiming JSA across the UK, up 7,200 from January 2012 and up  162,100 on the same period a year earlier. 

Redundancies and Vacancies

In the three months to January, 173,000 people had become redundant, up 11,000 from the previous quarter and up 30,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) has increased slightly in the three months to February 2012 by 15,000 to reach 473,000.  However, this is still 20,000 lower than the same period a year earlier.  

Key Regional Developments

·         Although the number in employment increased in the UK overall, numbers fell significantly in the North West, the East Midlands and London, by 51,000, 25,000 and 27,000 respectively.  The South West was also estimated to have experienced a slight fall in total employment, by 6,000.  The employment rate was highest in the East of England (74.7%) and lowest in the North East (66.5%).

·         The North East continues to have the highest unemployment rate of the nine English regions, at 10.8%.  However, compared to the previous quarter, unemployment increased by most in the North West, by 16,000 individuals and 0.6 percentage points, to a rate of 9.3%.

·         In the East Midlands, unemployment increased by 5,000 (or 0.3 percentage points) to a rate of 8.2%, which remains below the UK average of 8.4%, whilst the employment rate remains above the national average (at 71% compared to 70.3%).

[1] ONS Crown Copyright. 14 March 2012. ‘Labour Market Statistics: March 2012’.  TSO: London.

[2] ONS Crown Copyright. 14 March 2012. ‘Public Sector Employment – Q4 2011’.  TSO: London.

[3] According to the International Labour Organisation (ILO), this is defined as those who are out of work but available for, and actively looking for, employment within a set period.  This is expressed as the proportion of ‘economically active’ (employed plus unemployed) adults.

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February 2012 Labour Market Statistics Briefing

On the 15th of February, the Office for National Statistics published the Labour Market Statistics for February 2012, which covers Labour Force Survey (LFS) data for the final three months of 2011 and Jobseekers’ Allowance claimant data for January 2012.  This data indicates a further increase in unemployment, both on the quarterly LFS measure and the more timely monthly claimant count measure.  However, for the second consecutive monthly data release, there has been a slight increase in the numbers employed. 

The broadsheets and the BBC have largely reported reactions from City analysts and Government representatives who have presented the slight increase in employment and the slower increase in unemployment in very positive terms.  Today’s Guardian quoted Alan Clarke, of Scotiabank, who said: "If there was any doubt that the UK economy had turned the corner and that the worst news was in the past, then today's labour report should lay those concerns to rest." The Independent and the BBC both interviewed the Government’s Minister for Welfare Reform, Lord Freud, who described the latest data as “encouraging”, telling the Independent that: “With more people in employment and a rise in vacancies, it is clear the private sector is still creating jobs.” 

However, in our view it is too early to support such optimistic interpretations, especially on the basis of monthly estimates – which are far less robust than LFS data published quarterly by the ONS.  We also fear that this optimism fundamentally underplays the fact that the labour market remains in a very fragile state.  It is important to remember that employment and unemployment rates are ‘lagging’ indicators, meaning that they tend to follow changes in other indicators (such as GDP growth rates or leading indicators like business confidence or manufacturing orders).  Therefore it is likely that future LMS releases, at least for the next few months, will continue to suggest weak labour market conditions until there are stronger signs of recovery.

We also believe that some of the details within the data remain quite concerning. These include the fact that the recent increase in employment was driven by more people working part-time (masking a fall in both full-time employment and self-employment) and that disparities between English regions could be widening (with the number of unemployed increasing by 26,000 in the North West, over half of the total increase in unemployed people across the UK).  This is described in more detail below.

Unemployment and Employment Rates

LFS data for the three months to December 2011 suggest that unemployment has again increased, by 0.1 percentage points on the previous quarter to a rate of 8.4% in the UK.[1]  This represents an increase of 48,000 in the number of unemployed people compared to the previous quarter (with a total of 2.7 million estimated to be unemployed between October and December 2011).  The ONS emphasise that, in the context of the rapid increases in unemployment reported in recent months, this is a relatively modest rise – and is the lowest increase since April-June 2011.  However, compared with the same period a year earlier (October-December 2010), the latest rate is clearly a very significant increase – with 179,000 more individuals unemployed.  We believe it is important to bear in mind this longer term trend in unemployment when considering some of the reactions in the media summarised above.

Although unemployment has continued to increase, the latest LFS estimate suggests that employment has increased slightly (which was also the case in the three months to November 2011 reported in last month’s LMS).  The employment rate increased by 0.1 percentage points to 70.3%, an increase of 60,000 on the quarter to reach 29.1million employed.  It is possible for employment and unemployment rates to increase at the same time if economic inactivity (the proportion of adults who are neither employed nor unemployed, such as full time carers, students, etc.) decreases. 

Last month we reported that employment rose because an increase in the number of self-employees outweighed a decrease in the number of full-time employees.  This month’s data is rather different, with the number of full-time employees and self-employees both decreasing – by 26,000 and 10,000 respectively on the previous quarter.  The net increase in total employment has been driven by an increase in the number of part-time employees (by 90,000 on the previous quarter).  Unfortunately that further builds on a picture of labour market weakness, fuelled by a low demand from employers, as the number of people who said they only worked part time because they couldn’t find a full-time job (i.e. working part-time but wanting to work full-time) increased by 83,000,to reach 1.35 million – which is the highest number since records began in 1992. 

If last month’s story was an increase in ‘necessity’ self-employment, this month’s story is surely an increase in ‘necessity’ part-time working. 

Job Seekers’ Allowance Claimants

The proportion of Job Seekers Allowance (JSA) claimants in the UK in January 2012 was 5.0% of adults aged 16 and over, which is unchanged from the previous month but 0.5 percentage points higher than the same period a year earlier.  This is equivalent to 1.6 million adults claiming JSA across the UK, up 6,900 from the previous month (December 2011) and up 146,300 on the same period a year earlier.  These increases are slightly higher than the increases reported last month (for December 2011 JSA claimants compared to November 2011).

Redundancies and Vacancies

In the three months to December 2011, 164,000 people had become redundant, up 17,000 from the previous quarter and up 17,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) has increased slightly in the three months to January 2012 (after falling for two consecutive quarters) by 11,000 to reach 476,000.  However, this is still 21,000 lower than the same period a year earlier.   Given the relatively high level of unemployment, this now means that there are 5.8 ILO unemployed adults to every one vacancy, up from 5.6 in the previous quarter.

Key Regional Developments

·         Although the number in employment increased in the UK overall, numbers fell significantly in the North West and the East Midlands, by 15,000 and 32,000 respectively on the previous quarter. The East of England, South East and South West all experienced significant increases, by 25,000, 20,000 and 26,000.  This demonstrates a continued north-south divide in labour market conditions. 

·         Although the number in employment also increased in the North East (by 20,000), this region continues to have the lowest employment rate, at 66.2% - compared to 74.6% in the East of England.

·         Unemployment has increased in all regions except for the North East, Yorkshire and the Humber and the South West.  The largest increase was in the North West, where the numbers estimated to be unemployed increased by 26,000 (over half the total increase in unemployment across the UK).

·         In the East Midlands, unemployment increased by 1,000 (or 0.2 percentage points) to reach 8.2%, which remains below the UK average of 8.4%, whilst the employment rate remains above the national average (at 71.1% compared to 70.3%).

Source: ONS Crown Copyright, 'Labour Market Statistics: February 2012', 15th February 2012.

[1] According to the International Labour Organisation (ILO), this is defined as those who are out of work but available for, and actively looking for, employment within a set period.  This is expressed as the proportion of ‘economically active’ (employed plus unemployed) adults.

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Posen addresses the ‘productivity gap’ at Nottingham Business School

Bank of England Monetary Policy Committee member Adam Posen spoke at Nottingham Business School last night. The main focus of his presentation was to consider whether the recent recession and, as yet, painfully slow recovery provides evidence of a fundamental adjustment (down) to the trajectory of UK productivity growth. The good news was that he concluded ‘no’. The bad news was that we can expect to see unemployment continuing to rise for some time to come.

Underpinning this conclusion was an incisive analysis of sectoral performance based on, as yet unpublished, analysis by Bank of England economists. The main thrust of this analysis was to suggest that, in the wake of recession, a number of sectors are performing significantly worse (in terms of productivity) than the economy in general – the ‘dawdlers’. These dawdling sectors include financial services, professional and scientific services and, in his view, the highly unionised transport and logistics sector. In these 3 cases Posen suggested that employment had yet to fall to a level commensurate with reduced output – hence his prognosis on unemployment.  He would not be drawn on which sectors were out-performing the norm – although there were hints elsewhere in his speech that export orientated manufacturers are worth watching.

He did not address regional differentials in economic performance, but given what we know about the uneven distribution of sectors across the UK regions, this analysis could have significant regional implications. We will post a link to Posen’s presentation as soon as it is published by the Bank of England.