tag:blogger.com,1999:blog-48550995038990432792024-03-18T00:43:22.802-07:00John Philpott -The Jobs EconomistJohn Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.comBlogger148125tag:blogger.com,1999:blog-4855099503899043279.post-31040330627629696152020-07-16T01:15:00.000-07:002020-07-16T01:15:19.068-07:00UK's headline unemployment rate flatters to deceive - but perhaps not for too much longer<br />
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<span style="font-size: 12pt; text-indent: 0cm;">The UK Office for National Statistics has just released its monthly compendium of labour market data. These are nowadays usually published on a Tuesday, so it's a back to the future moment for those of us old labour market watchers who trawled over the numbers on a Thursday morning in the 1980 and early 1990s. However, and surprisingly for some given the magnitude of the impact of the Covid-19 lockdown, today's figures, including Labour Market Survey (LFS) results for the quarter March to May, don't show 1980s and 1990s levels of mass unemployment. </span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">While these figures provide the best official picture so far
of what happened in the peak period of the lockdown, what
emerges is a mosaic comprised of numerous negative impacts drawn from various
data sources rather than a crystal-clear image. Our view of the underlying jobs
situation is particularly blurred. The LFS indicates that the total number of
people in work fell by 126,000 in the three months to May – with part-time
employees and the self-employed hit hardest – but the ONS’ more up to date flash
estimates of employment based on PAYE data show that the number of employees fell
by 649,000 between March and June. Meanwhile, job vacancies fell by 463,000 between
April and June to a survey record low of just 330,000, resulting in a sharp
fall in people starting new jobs. </span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">Yet despite this there was no rise in the
headline unemployment rate which remains at a situation defying 3.9% largely
because many of those who found themselves without work while the economy
remained in its hiring sapping Covid-19 induced coma ended up stuck in the
ranks of the so-called economically inactive. The number of economically
inactive people who told the LFS they wanted a job jumped by a record 253,000
in the three months to May. Add these extra ‘want work inactive’ people – the ‘hidden’
jobless - to the active unemployment pool and the full magnitude of the underlying
labour market crisis becomes more apparent.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">Thankfully, emergency policy measures, notably the large
scale government funded Job Retention Scheme, prevented an even more
catastrophic outcome in what we should now see as phase 1 of the Covid-19
labour market crisis, the overall severity of which is evident both in data for
total weekly hours worked in the economy and average earnings. With millions of
furloughed workers in jobs but doing no work, plus many other workers put on
short-time working, total weekly hours worked in the economy suffered a record annual
decrease of 175.3 million (a whopping 16.7%) falling to a near 23 year low of
877.1 million. Fewer hours combined with a mix of pay cuts and pay freezes have
in turn hit regular average weekly earnings, which fell by 0.7% in cash terms and
by 0.2% in real terms.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">Worryingly, as we move beyond phase 1 of the Covid-19
labour market crisis, the underlying jobs situation is likely to get a lot
worse before we see any noticeable sign of a turn in the tide. Business surveys
also published today suggest major job cuts are inevitable into the late summer
and autumn as employers faced with an uncertain economic outlook and less
generous financial support for furloughing decide to shed rather than retain
furloughed staff. A reasonable expectation is that at least 800,000 to 1
million currently furloughed workers will lose their jobs by the end of this
year, while more of those people currently economically inactive will start
searching for whatever work they can find. If so phase 2 of the labour market
crisis will hit much harder than phase 1 as Covid-19 leaves us stricken with a
double-digit unemployment rate.<o:p></o:p></span></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com14tag:blogger.com,1999:blog-4855099503899043279.post-83877404786844930472020-06-16T00:28:00.001-07:002020-06-16T00:28:28.919-07:00The latest UK jobs figures - an unfolding crisis in slow motion <br />
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<span lang="EN-US" style="font-size: 12.0pt;">The UK Office for National Statistics (ONS) this morning published its latest set of numbers on the state of the labour market, which using US terminology we might collectively refer to as the monthly Jobs Report.</span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">Looking at these figures is a bit like watching the
early part of a slow-motion video of a car crash when you already know the horrible
outcome but have only witnessed the initial jolt. The quarterly headline employment
and unemployment numbers are little changed on the previous quarter, in part flattered by the inclusion of pre-Covid-19
lockdown figures but more importantly by the government funded furlough scheme which
has so far acted as a life raft for millions of jobs. A surge in furloughed
workers with jobs on partial pay but no work to do, plus many others hit by
cuts in hours and pay, has had a big impact on employee incomes. The annual fall
of 94.2 million in total weekly hours worked in the economy is a record decrease,
in turn dragging the rate of growth of regular average weekly earnings down to
1.7%, or just 0.4% in real terms. However, we know the underlying jobs situation
is much worse than this. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">The ONS’ more up to date flash estimates based on
PAYE data show that the number of employees fell by 612,000 (2.1%) between March
and May, with Labour Force Survey data also suggesting a fall in
self-employment of well over 100,000. Add in a record quarterly decrease in job
vacancies, which will be hitting young job seekers especially hard as they try
to enter the labour market, along with what we can see from a rise in claims by
unemployed people for Universal Credit, and it’s clear that level of
unemployment will by now be somewhere between 2.5 and 3 million. The key question
for the coming months is how much higher the jobless rate climbs as the furlough
scheme unwinds and we begin to discover what the post-Covid-19 employment landscape
actually looks like.<o:p></o:p></span></div>
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<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com2tag:blogger.com,1999:blog-4855099503899043279.post-2948308053900432022020-05-01T04:52:00.000-07:002020-05-01T04:52:24.670-07:00Economics of Covid-19 – Let’s all avoid the ‘A word’<br />
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;">Boris Johnson is back from his personal battle against
Covid-19 and yesterday chaired the daily Downing Street coronavirus press briefing
for the first time since late March. One journalist asked if the cost of the
pandemic to the public purse meant that the crisis will be followed by another lengthy
period of fiscal austerity. The Prime Minister refused to utter the ‘A word’ preferring
instead to look forward to the sunny uplands of an economic rebound. Many will
see his response as a mix of political necessity and typical Johnsonian optimism.
Either way, I think we should all avoid fretting about public borrowing and
debt at present and focus instead on how to boost economic growth. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;">I was born in the 1950s at a time when the UK and many
other major economies were burdened with massive post-war debt. Yet the first
20 years of my life were a time of growing prosperity, the ‘never had it so good’
generation. There was post-war debt but also a post -war boom, with very rapid rates
of growth in national income driven by economic and social reconstruction. Public
debt mattered but could be financed and so didn’t, to use contemporary
parlance, ‘impose an intolerable burden’ on the post-war generation. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;">Unfortunately, for the past 40 years public discourse has
been so dominated by small government thinking that balanced budgets are seen
as a good thing in all circumstances on the assumption that state activity almost
always crowds out private investment and enterprise. This is nonsense. It’s
useful to be fiscally prudent in good times, reducing deficits and paying down
debt, while the private sector does many things better than public bodies. But fiscal
prudence doesn’t make sense if it actually results in reduced income generation,
while excessive prudence (i.e. unwarranted austerity of the kind we saw for much
of the past decade with the political aim of cutting public spending to the
bone) is worse still. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;">I suspect that when the current crisis is finally behind us
the UK government’s economic policy response will gain far greater plaudits
than its health response. We should now ensure that economic policy continues
on a sensible course as we gradually emerge into the post-crisis new normal.
The focus must be on reconstruction and economic growth rather than short-term obsession
with public borrowing and debt. Indeed, we will almost certainly need more
fiscal stimulus, especially to boost investment, rather than less. The PM is
right to avoid the ‘A word’ – we all should. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com3tag:blogger.com,1999:blog-4855099503899043279.post-59128298440277593002020-04-21T00:31:00.000-07:002020-04-21T00:31:14.089-07:00UK jobs market was cooling before coronavirus crisis – 8% jobless rate now the best we can hope for<br />
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<span lang="EN-US" style="font-size: 12.0pt;">Earlier today the UK Office for National Statistics (ONS)
published its latest monthly Jobs Report, mostly including data from the
quarterly Labour Force Survey for the three months to February 2020. According
to the ONS the labour market was ‘very robust’ at that time. But to me things looks
to have cooled before the Covid-19 lockdown measures placed the economy in a
coma to help save lives. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">Although the number of people in work increased by a very
healthy 172,000 in the three months to February (taking the employment rate to
a record high of 76.6%), with fast growing labour supply this was not enough to
prevent a rise of 58,000 in the number unemployed, lifting the unemployment
rate back to 4%. Cooling was also evident in a fall in total hours worked, fewer
job vacancies and softening in the rate of growth of average weekly earnings,
which dipped to 2.9% excluding bonuses (or 1.3% in real terms). Moreover, the
ONS reports more up to date figures based on PAYE data which show that the
number of employees fell very slightly (by 0.06%) between February and March –
what will prove to be the beginning of the largest shake-out of UK jobs for at
least 40 years. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">Given what we know about the massive shock to the
economy in the past month, it’s disconcerting to see that the jobs market was already
starting to look a bit off colour when Covid-19 arrived on our shores. Whether
this has implications for how well the market recovers after the lockdown is
unclear but in any case we won’t be seeing the unemployment rate anywhere close
to 4% for several years, with a peak of at least 8% the best we can hope for
even with the government’s welcome business support and job retention measures
in place. Some scenarios, such as that published last week by the Office for Budget
Responsibility, look to a jobless peak of 10%, albeit with a relatively swift
recovery. For the time being I remain on the ‘optimistic’ end of the opinion
spectrum. But uncertainty about the future course of Covid-19, let alone the
economy, makes me feel uneasy, and I look ahead as much with hope as
expectation. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-83467769498667820072020-04-04T05:09:00.000-07:002020-04-04T05:09:14.272-07:00Economics of Covid-19 – humanitarian vs. utilitarian <br />
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">Economists pay a lot of attention
to policy choices and trade-offs. Genuine free lunches are a rarity. The coronavirus
pandemic has spurred a lot of comment on trade-offs, from economists and non-economists
alike. Are governments, by effectively putting large parts of their economies
into deep freeze to combat Covid-19, paying too high a price in terms of lost
business, work and incomes to save what might prove to be a relatively small
number of lives?<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">This seems like a horrible question
to pose at this time of crisis but it is not completely unreasonable. As I say,
trade-offs are part of the very stuff of economics. Indeed, implicit trade-offs
are always being made within health systems. Available resources are finite and
concepts like ‘quality of life years’ play a role in determining how to allocate
care to different groups of people. It’s also likely that during the current
crisis some medical practitioners will be faced with the distressing choice of
which Covid-19 patients to help if hospitals run short of life saving equipment.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">However, acceptance of this kind
of micro choice doesn’t mean we should apply a similar calculus at the
macro-level. The utilitarian principle of ‘the greatest good of the greatest
number’ is of limited practical value when, as at present, we simply don’t have
sufficient information to assess the trade-offs involved at the point when
policy decisions have to be made. </span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">Even when the crisis is over, any post hoc assessment
of the trade-off will be questionable because we’ll never know the counterfactual.
UK epidemiologists think that without the lockdown and other measures the
government has taken the death toll from coronavirus could potentially hit
500,000 in the UK alone. If, as we pray, the outcome is far better than this it
will be highly misleading to simply weigh the economic cost against the actual
number of deaths.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">I fully understand why, with so many
people suffering financial hardship as we battle Covid-19, some ask ‘is it
worth it?’ I can’t answer that question but when pondering it my conclusion is
that policy makers should favour the humanitarian response over the
utilitarian. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-78155877630202499652020-04-03T05:11:00.000-07:002020-04-03T05:11:20.399-07:00Economics of Covid-19 – why total hours of work could prove the key labour market statistic in this crisis <br />
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">Each day brings yet sadder news.
The UK death toll from Covid-19 is now just shy of 3,000 and will probably pass
that mark when we receive the next update this afternoon. Particularly sobering
is the constantly updated tally of deaths in the United States and globally
published by Johns Hopkins University, the global total already above 50,000<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">The human scale of this
relentless tide of grim health statistics is evidenced by the fact that staggering
record-breaking figures on the number of people making claims for unemployment
related welfare benefits haven’t monopolised the headlines in either the US or
UK in quite the way they would at any other time.<o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">As mentioned in an earlier blog,
it will be a while before we start to see the effects of the Coronavirus crisis
appear in the UKs published official labour market statistics. In this respect
the US Bureau of Labor Statistics is ahead of the game. But the UK’s Office for
National Statistics (ONS) has helpfully begun to issue snapshot data on the business
impact of Covid-19. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">The first weekly release
published yesterday showed that of more than 3,600 business responding to a
survey between 9 March and 22 March 27.4% reported they would be cutting staff
numbers ‘in the short-run’. A similar proportion 28.5% had reduced staff hours,
while approaching half (46.2%) were requiring staff to work at home in line
with government advice on social distancing for non-essential workers. Some of
these businesses were making a combination of such adjustments and one would
expect some will also be making pay cuts or introducing pay freezes, though
this is not covered in the survey. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">While these data are useful, they
don’t come close to giving us the kind of numbers that will at some point be
provided by the large-scale rolling Labour Force Survey (LFS). Assuming the
ONS’ normal data collection process isn’t itself disrupted by social distancing
– interviews are conducted face-to-face as well as by telephone – analysts will
be digging into crisis relevant data from late spring onward. However, even
when these data become available, the labour market impact of this particular
crisis could prove trickier to read than usual. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">One reason is that the impact is
very abrupt. An emergency brake has been applied to large swathes of economic
activity. We’re not experiencing a slowdown and slide into recession but a
sudden sharp halt. There is not the kind of lag in the labour market impact one
would normally expect but instead a punch in the gut that immediately takes the
wind out of the sails. The bad news is that, among other negative effects, this
causes a mega surge in job or income losses so big that it tests the ability of
policy makers to respond. The less bad news is that the initial surge doesn’t
necessarily mean a relentless wave of pressure on the system. More likely is a
sudden bout of acute pain which doesn’t get noticeably worse the longer the crisis
continues but will nonetheless be very tough to live with. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">Another oddity of the current
crisis is widespread use of furlough procedures. An as yet unknown but almost
certainly high number of employees will be retained in jobs but placed on
furlough under the government’s emergency Job Retention Scheme (involving an 80%
wage subsidy subject to a monthly cap of £2,500). It also looks as though some
employers will retain staff in similar ways without participating in the
government scheme. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">Furloughing hasn’t tended to be a
noticeable feature of UK employment practice during recessions: job cuts,
shorter hours, pay cuts or some combination of these adjustments are generally
more common place. But the significance of the furlough for our reading of
labour market statistics is clearly demonstrated by a look at how the Job
Retention Scheme will operate. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">To be eligible, furloughed
employees won’t be able to do any paid work for their employer or paid work
elsewhere (they can if they wish do unpaid voluntary work). Despite them being ‘idle’
the LFS will count these employees as in employment. A person is deemed to be
employed if he/she has done at least an hour of paid work in the week when
surveyed or is temporarily away from work for a legitimate reason such as paid
holiday, sickness absence or, in current circumstances, on furlough. Consequently,
the headline employment figure obtained from the LFS will give a somewhat flattering
picture of the effect of the crisis, as might the level of unemployment and economic
inactivity insofar as these furloughed employees would otherwise lose their
jobs. <o:p></o:p></span></div>
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<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">The hit on the labour market will
therefore be much better reflected by the slump in hours worked by furloughed
employees, which will be in addition to cuts in hours worked by non-furloughed employees
who keep their jobs and by self-employed people unable to find any or only a
limited amount of work. But this is not the only reason why hours of work will
prove to be an even more important statistic than usual in this particular
crisis. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">In a normal recession, hours lost
through sickness absence tend to dip; throwing a sickie is not a good idea when
jobs are on the line. But in this Covid-19 induced crisis, rates of sickness absence
will rise significantly, the virus in this way having its most direct negative impact
on the labour market. Offsetting this, however, are two other unusual features
of the current crisis. Essential services, across both public and private
sectors, are working even harder than usual and increasing hours as well as
recruiting extra staff. And anecdotally, it appears that the shift to
widespread working from home during the lockdown might be seeing people putting
in extra hours because they’re spending less time commuting. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">What kind of overall hours effect
should we thus be looking at? In the last three major UK recessions (the early
1980s, early 1990s, and 2008/9) total hours worked fell by 5.3%, 5.2% and 4.1%
respectively. The corresponding falls in total employment were 2.4%, 3.4% and
1.9%. Judging from what we can see so far about the current crisis and the
initial employment policy response it looks as though the fall in hours will be
at least on a par with the relatively large falls suffered in the 1980s and
1990s even if we manage to avoid job losses on quite the same scale. Either way,
hours of work (and, more important still, what change in these mean for weekly
earnings) could prove to be the key labour market statistic to look at when measuring
the impact of Covid-19. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-48912943083982025982020-03-31T04:57:00.000-07:002020-03-31T04:57:09.339-07:00Economics of Covid-19 – April 1st Living Wage hike could prove to be fools gold <br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;">The statutory National Living </span><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">Wage increases
by 6.2% tomorrow, rising to £8.72 an hour for employees aged 25 and over,
benefiting around 2 million people. The lower National Minimum Wage rates for
younger people go up 6.5% for 21 to 24 year olds and by 4.6% for the under 21s.
That’s right, tomorrow, in the midst of a national economic crisis. A brave
move, demonstrating how even Conservative governments have been fully converted
to the merit of minimum wage regulation, or foolhardy at a time when many
businesses are struggling to survive and millions of people are worried about
their jobs? <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">As in any
crisis there will be winners as well as losers over the coming weeks and
months. People working in essential services, public and private, may well see
their workloads increase and receive higher reward for additional hours if not
bigger pay awards. But at least as many private sector or charitable sector
organisations will be badly affected by the Covid-19 lockdown. These will be making
immediate pay cuts (including those who participate in the Government’s Job Retention
Scheme but don't top up the 80% wage subsidy on offer), introducing pay freezes
and/or cutting hours. Unemployment will also be rising as some businesses cut
jobs which will depress wage pressure in the economy overall.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">Millions
of employees will feel the pinch which will slow average weekly earnings growth
considerably. Without the Living Wage/Minimum Wage increases we would probably
be looking at growth in regular average weekly earnings slowing from around 3%
to around 1.5% in a matter of a few months and then slowing further the longer
the crisis lasts. If so, real wage growth will fall close to if not below zero
(depending on what happens to price inflation). This is bad news because we’ve
only recently seen the average real weekly wage rise above the pre-Great
Recession level. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">In view
of this tomorrow’s Living Wage hike might be seen as a good move, offsetting the
depressing economic effect of Covid-19 by putting more money in the pockets of
the working poor. However, the Living Wage/Minimum wage increase is likely to
prove only a partial palliative. A lot of recipients of the hike will be
employed in exactly the kinds of sectors hardest hit by the crisis and
employers may well respond by making even bigger cuts in hours or jobs than
would otherwise be the case.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">The overall
effect on nominal average weekly earnings growth is difficult to judge since we don't yet know how businesses will respond. Optimists can point to well
researched evidence of the benign effect of the minimum wage over the past 20
years, though whether this is guide to what might happen now is questionable. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;"><span style="mso-spacerun: yes;"><br /></span></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">What one
can say is that in current circumstances the faster the rate of growth of
nominal average weekly earnings the smaller the squeeze on real wage growth and
the greater the risk of a bigger than necessary rise in unemployment. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">While a
rise in the Living Wage/Minimum wage is highly desirable in normal times these
are very far from normal times and a 6+% wage rise looks like Alice in
Wonderland economics. Lewis Carroll himself might marvel at the Government
hiking the pay of employees it was at the same time subsidising to keep in work.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">There is
of course nothing to stop ministers from exhorting employers who are able to
afford it to voluntarily match the planned increase, perhaps targeting the
supermarkets who might make a goodwill gesture to hardworking staff at this
time. But it would be advisable to either limit the statutory increase or, and
preferably, postpone it, with maybe October 1<sup>st</sup> rather than April
Fools Day a better choice. </span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;"><span style="mso-spacerun: yes;"> </span>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com1tag:blogger.com,1999:blog-4855099503899043279.post-8871072186997531542020-03-29T07:28:00.000-07:002020-03-29T07:28:22.373-07:00Economics of the Covid-19 crisis – How well might the UK's labour market policy model cope? <br />
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">We learn this morning that the UK
Prime Minister is writing to every household with a grim message on coronavirus
– ‘Things will get worse before they get better’. He’s referring of course to
the terrible effect of Covid-19 on people’s health. But the same can be said of
the effect on people’s livelihoods. So how much worse might things get and how
long might it be before they get better?</span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-spacerun: yes;">
</span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">A times of economic crisis such
as that triggered by the pandemic, attention is understandably focused on the
severity or nature of the shock and specific policy interventions introduced to
counter it. As important, however, is the broader underlying orientation of
policy – the labour market policy model (LMPM) – which will ultimately determine
how the current crisis affects people’s jobs and incomes.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">There is no off-the-shelf
definition of an LMPM. I think of it as the mix of polices that in different
ways affect the behaviour of employees, people in work, and people without work
who might reasonably be expected to find work. Ideally, during a time of
economic crisis, the LMPM will act to encourage employers to cut wages or hours
or work rather than jobs, encourage people in work to restrain wage demands,
and ensure people without work remain willing and able to fill any job
vacancies that are or become available. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">In terms of specific policies
this covers things like employment protection measures (i.e. the ease of
ability of employers to hire and fire staff), individual employment rights, wage
bargaining procedures, wage subsidies/tax credits, and active welfare measures
that place job search conditions on jobless benefit claimants. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">The way in which these types of policies
interact, operating as an LMPM, not only determines how much unemployment an
economy experiences in normal times but also makes a critical difference to the
way in which we experience recessions. Labour markets with good LMPMs are often
referred to as ‘flexible labour markets’, though one needs to be careful about
the latter term since conceptually it can mean different things and has
ideological connotations. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Guidelines on best practice began
to spread internationally following the OECD Jobs Study in 1992. <span style="mso-spacerun: yes;"> </span>A good LMPM will operate to minimise the peak
in unemployment during a recession and thereafter facilitate a rapid sustained
fall in unemployment to at least the pre-recession rate. To achieve this, the
LMPM must continually adapt to structural change in the labour market and if
necessary be easily amenable to short-run policy adjustments. No recession is
ever exactly the same as another and it’s important that one doesn’t persist
with a rigid LMPM only capable of ‘fighting the last war.’ <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">The UK’s LMPM has developed
considerably in the last 40 years, during which the economy has suffered three
major recessions, in the early 1980s, the early 1990s and the late 2000s. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Between January 1980 and March
1981 GDP contracted by 4.6% before starting to recover. </span><span style="font-family: "arial" , sans-serif; font-size: 12pt;">At that time,
employers’ ability to hire and fire was fairly weak but union power was still
very strong, limiting wage restraint. In addition, the welfare system was
almost totally inactive.</span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Large numbers of benefit
claimants gave up looking for work, effectively detaching themselves from the
labour market. This resulted in a massive pool of long-term jobless and cut the
usable supply of people, thereby putting upward pressure on wages and causing
mass unemployment to persist for years after the recession had ended. </span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">The
unemployment rate increased from 5.5% before the recession to a peak of 11.9%
in the summer of 1984 and stuck at around that rate before staring to fall in
the second half of the decade, to a low of 7% at the onset of the 1990s
recession. The fall is normally attributed solely to the expansionary ‘Lawson
boom’ but the developing LMPM played an important part, notably the
introduction in 1986 of Restart job search interviews for claimants of
unemployment benefit which led the way in activating the welfare system. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">At the start of the 1990s after a
decade of reform the LMPM was considerably different. Both employment
protection and union power had been weakened but active welfare reform was
still a work in progress. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">The contraction in GDP of 2.5%
between July 1990 and September 1991 was less than that suffered in the early
1980s recession. However, the enhanced ability of employers to fire staff
outweighed slightly greater wage restraint. The result was what some economists
at the time called ‘oversacking’ because the shake out of jobs was much bigger
than the depth of the recession actually warranted. </span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">On the plus side, however, once
GDP began to recover employers’ enhanced ability to hire and fire, plus the
emergence of a somewhat more active welfare regime, resulted in a much swifter
and sustained fall in unemployment than experienced in the 1980s. Although
unemployment peaked at a very high rate of 10.6% in the spring of 1993, the
peak came only 3 years after the previous trough. The unemployment rate then
fell almost continually and was still on a downward path in 2008 at the onset
of the Great Recession when the rate stood at 5.2% <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">As its name suggests, the Great
Recession was far worse than its two immediate predecessors, GDP contracting by
6.4% between April 2008 and September 2009. Within the LMPM, employment
protection was slightly stronger than in 1990, union power remained limited and
the welfare system had become much more active. </span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">This combination resulted in a
smaller shake out of jobs than in either the 1980s or 1990s recessions, with
wage cuts and shorter hours predominant, and a correspondingly smaller rise in the
unemployment rate, from 5.2% at the start of 2008 to 8% at the start of 2010. The
main shortfall in the model at the time proved to be lack of adequate provision
for dealing with young jobseekers. By dampening the shake-out of jobs the LMPM also
served to depress recruitment activity, hitting young entrants to the labour
market even harder than usual.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">The Noughties version of the LMPM
would almost certainly have enabled an earlier peak in total unemployment following
the Great Recession and a rapid subsequent fall had a nascent jobs recovery in early
2010 not been curtailed by strict fiscal consolidation measures that began to
be imposed on the economy later that year. Having dipped between the spring and
autumn of 2010, the unemployment rate started to rise again reaching a peak of
8.4% at the end of 2011. </span><span style="font-family: "arial" , sans-serif; font-size: 12pt;">There was then a de facto easing of fiscal policy with
the acceptance that the initial deficit reduction timetable would need to be
extended, allowing for higher public borrowing than originally planned which
helped support aggregate demand.</span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">From that point onward the LMPM
began to facilitate the kind of swift and sustained fall in unemployment that
one would otherwise have expected to see from early 2010 onward. This,
incidentally, places talk of a remarkable post 2012 ‘jobs miracle’ in its
proper perspective. An understanding of the Noughties version of the LMPM made
the supposed ‘miracle’ entirely predictable a decade ago, and some of us are on
record as saying so at the time. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">What might we expect in the wake
of the Covid-19 crisis? How recession proof is LMPM 2020? <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">I</span><span style="font-family: "arial" , sans-serif; font-size: 12pt;">n its essential features the
LMPM appears as robust as it did when the Great Recession struck. But two
issues in particular are worthy of attention.</span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">The LMPM is slightly weaker on
employment protection than in 2008, with employers able to fire regular
employees with less than two years’ service without legal comeback (at present that’s
around 7 million people). Moreover, the model has been largely permissive on the
rise of the so-called ‘gig economy’ of casualised contract workers (employing around
6 million people, including the self-employed) which now represents a
significant enclave of super (or maybe one might say uber) hire and flexibility
within the labour market. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">There is therefore a clear risk
that the current LMPM leaves us more prone to a bigger shake-out of jobs than
during the Great Recession. In view of this the government’s Covid-19 emergency
adjuncts to the LMPM such as the Job Retention Scheme and Self-Employment Income
Support Scheme might have been necessary notwithstanding the sheer scale and
nature of the coronavirus crisis.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Another potential worry is the
operation of the Universal Credit (UC) welfare system. While UC is in principle
no more than the latest iteration of an activity focused benefit system, concern
has been raised that in practice it is performing less well than its
predecessor systems at helping claimants into work. Well before any of us had
heard of Covid-19, some labour market policy experts were warning that UC was
slowing flows from unemployment and economic inactivity to employment, leading
to a considerable rise in the stock of UC claimants. With early DWP figures
pointing to a surge in the inflow of UC claims since the Covid-19 lockdowns
came into effect, possibly leading to system overload, urgent improvement to
the activation aspects of the benefit would seem necessary. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">At the time of writing, the
projected UK peak in coronavirus cases is still several weeks away and the
duration of the widespread social lockdown is unknown. There is also the
distinct possibility of further intermittent lockdowns to combat subsequent waves
of the virus in the absence of herd immunity or a suitable vaccine. With large
swathes of the economy already effectively placed in a coma, the contraction in
GDP is almost certain to be larger than during the Great Recession, and while it’s
hoped the Covid-19 induced recession will be shorter this cannot be taken for
granted.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">At present I anticipate that
measures such as the Job Retention Scheme and the Self-Employment Income
Support Scheme should be enough to buttress us from some of the employment
protection weaknesses built-in to the LMPM since 2010. This would suggest a
doubling of the unemployment rate from 3.9% prior to Covid-19 to a peak of
around 8% (similar to the Great Recession peak), bad enough yet not disastrous. Additional interventions might also prove necessary to address particular problems if they arise, such as differential impacts on different groups in the labour market, so as to avoid a repeat of the Great Recession when too great a burden was allowed to fall on young jobless people. </span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">The fiscal cost of achieving this outcome will be jaw dropping but preferable
to the combined economic and social cost of allowing the unemployment rate to
soar into double digit territory.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">How long unemployment remains at
the peak rate before starting to fall will then depend in part on the length of
the Covid-19 recession and in part on the operation of the LMPM. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">While the current hire and fire
features of the LMPM makes us more prone to a big shake-out of jobs during a
recession they should also enhance prospects of an early rebound in hiring
during the recovery. This bodes well for a swift post-recession jobs bounce back.</span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12pt;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12pt;">However, question marks over the operational effectiveness of UC raise
the possibility that the jobs recovery might be slowed by bottlenecks in the
system for moving jobless people off welfare and into work. This possibility
ought to be considered and addressed with considerable urgency.</span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">In any event, to support the LMPM
economic policy makers will need to learn from the mistake of 2010 and adopt a
slow and steady rather than fast and furious approach to the major fiscal
consolidation that inevitably awaits us once Covid-19 has finally been
defeated.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-28780673808675200542020-03-24T05:58:00.000-07:002020-03-24T06:04:15.718-07:00Economics of Covid-19 – how should we help the self-employed?<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Since the Chancellor announced
the Job Retention Scheme (JRS) to protect regular employees during the current
crisis there have been widespread calls for him to offer support to other
groups of workers, notably the UK’s more than 5 million self-employed people.
An announcement is expected soon, the Chancellor this morning said that preparations were moving ahead 'at pace'. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">I understand the concern – I’ve
been self-employed for most of the past decade. But I also think we need to be
careful in our response. While some self-employed people are de facto employees
effectively pushed toward this status by gig economy bosses, for most it is a
lifestyle choice conveying a mix of advantages but also carrying considerable
risk. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Self-employed incomes are generally
relatively low and often uncertain. Many of us are grateful to make the annual
equivalent of the statutory minimum wage (to which we are not entitled). Financial
risk is an everyday reality. Yet if opinion surveys are to be believed
self-employed people are on average happier than employees, enjoying flexibility
of hours and not having to put up with overbearing employers. </span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">Given these accepted
pros and cons, it seems inappropriate to expect too much financial support from
government – i.e. the general taxpayer, mostly employees – during times of
crisis. The state should not underwrite the risks associated with self-employment
and with the public finances under severe strain ought to provide only what to
some will seem like fairly limited support.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">My proposal is fairly
straightforward, to avoid the complexity associated with relating support to data
on individual self-employed incomes. Any person who has been registered self-employed
for the past two years and earned enough in the tax year 2018-19 to have to
complete a self-assessment tax return would be entitled to a flat rate tax
credit payment. This would be set at £1,500 per month, equivalent to the likely
average level of wage support for employees under the JRS, for as long as the
Covid-19 crisis persists. All other self-employed people would apply for any
unemployment related benefits which they are assessed as being entitled to.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">This would represent a particularly
substantial hit to the incomes of high earning self-employed people, and might
seem unfair to low earners or normally high earners who received an unusually
low income in 2018-19. Many of the low earners will be amongst the 40% of
self-employed people who work part time, including a lot of older people, a group
in the vanguard of the sharp rise in self-employment in recent years. A mitigating
factor for these people is that freelancing is often a top-up to available
savings and any equity they have acquired from rising house prices which would
dampen the hardship they experience. <o:p></o:p></span></div>
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 12.0pt; line-height: 107%;">I guess this suggestion won’t appeal to a lot of self-employed people and
I’ll be interested to see what the Chancellor decides to do. Either way, a
considerable amount of financial pain seems inevitable. </span>John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-83016279217235382852020-03-23T06:01:00.002-07:002020-03-23T06:01:56.702-07:00Unnerved<br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;">About a month ago, well before Corvid-19 had entered the
vocabulary, a young man started to walk up and down the road outside my front
window. He has done so every day since, for hours on end. I see him first thing
in the morning when I open the curtains, and he’s usually still there when I
close them at night. Sometimes he lengthens the distance he walks before turning
to retrace his steps, but he never seems to stop. He stares straight ahead, oblivious
to other people and unresponsive to attempts at communication.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;">I have no idea who this young man is, or where or how he lives,
eats and sleeps. He is of East Asian appearance and well kempt, invariable dressed
in dark trousers and dark hoodie, the hood always down. He doesn’t appear to be
at all emotionally distressed, merely ‘in the zone.’ I wonder if he is
meditating, something that maybe we might all benefit from in these strange
times. Yet, and I feel ashamed to say this, I find myself unnerved by his daily
ritual.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;">Maybe this can be put down to superstition. I come from the
kind of old school Irish Catholic family for whom tales of the supernatural were ingrained in cultural heritage. As a child I would cower at mention of the
Banshee, whose wailing cry was said to portend a death and who would exact
terrible punishment on anyone who made off with the comb she used on her long
white hair. In my imagination, the walking man also represents something potentially
sinister, as if he is about to raise his dark hood and produce a scythe.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%;">My normally rational self of course dismisses such thoughts
as nonsensical. But I’m unnerved because these are far from normal times. I don’t
really fear the walking man, I fear the coronavirus and the eerie state of mind
it has instilled in so many of us across the globe. I suspect I’d be happier if
I never saw the walking man again, but it’s the damned virus I want to wave
goodbye to. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-16138215396667543042020-03-22T09:55:00.000-07:002020-03-22T09:55:01.926-07:00How previous UK job retention subsidies compare with the Chancellor’s Covid-19 crisis scheme<br />
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">The UK government is in the process of delivering a
multi-billion package of economic measures to help protect businesses, jobs and
incomes while our country tackles the Covid-19 virus. The package includes a Job
Retention Scheme under which 80% of the pay of employees of participating private
sector employers who agree to retain rather than lay them off during the crisis
will be covered by the Exchequer, subject to a cap £2,500 per employee per month.
It’s hoped that employers will top-up the payment so that employees receive a
full wage but this is not a requirement. <o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Given the high incidence of low paid employees in
sectors most directly affected by the civil contingency measures being taken by
government to contain the spread of the virus – predominantly those providing
services face-to-face to consumers - the average Exchequer payment is likely to
be around £1,500 per employee per month. The JRS is initially proposed to
operate for three months, though subject to extension if necessary, the main
stipulation being that employees whose pay is covered by the scheme do not work
(in the technical language used by government they must be furloughed i.e.
given temporary leave of absence).<o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">The gross financial cost of the JRS will depend on how
many employees are covered, which won’t be known until the precise delivery
mechanism is finalized and employers come forward to participate. Assuming a
high level of take-up in current circumstances one can expect the cost to run
to at least several £billion. But as with all such measures the net cost will
differ from the headline cost. This is mainly because of corresponding savings
in welfare benefit payments that would be made to employees laid-off. By the same
token, however, it is the possible that some employees supported by the scheme
will have been retained without it (the deadweight effect).<o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<a href="https://www.blogger.com/null" name="_Hlk35787428"><span lang="EN-US" style="font-size: 12.0pt;">Such is the
potential scale and cost of the JRS it is being widely described as a
mind-blowing extension of direct state intervention in the labour market – ‘the
nationalization of work’ - the UK copying the job retention policies of
countries like Denmark and Germany. Yet while both the JRS and the
circumstances in which it is being introduced are truly remarkable, the UK has its
own experience of running large scale state subsidized job retention schemes.<o:p></o:p></span></a></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span style="mso-bookmark: _Hlk35787428;"><span lang="EN-US" style="font-size: 12.0pt;">The
Temporary Employment Scheme (TES) operated from 1975 to 1979 in the wake of the
stagflation ushered in by the Oil crisis. This was succeeded by the Temporary
Short Time Working Compensation Scheme (TSTWCS) which ran until 1983</span></span><span lang="EN-US" style="font-size: 12.0pt;">. I looked at both these schemes in the
1980s as part of wider comprehensive reviews of publicly funded employment
programmes and subsidy measures. Sadly, this was before the arrival of the easy
to use word processing packages we enjoy today, let alone electronically
transferable documents, so I don’t have my reviews available to put online.
However, my notes from the time include enough information to enable me to make
a few comparisons with the JRS.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;"><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Unlike the JRS, neither TES nor TSTWCS required
subsidized employees to be put on furlough. In stark contrast to what is likely
with JRS, the earlier schemes were almost entirely taken up by manufacturing
employers (manufacturing then not only still accounted for a really big share
of total employment but was also the sector government industrial policy mostly
focused on).<o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<a href="https://www.blogger.com/null" name="_Hlk35787641"><span lang="EN-US" style="font-size: 12.0pt;">Although these earlier
schemes have largely faded from memory, they were a big deal at the time. TES,
for example, supported around 2% of total private sector employees at its
height, equivalent to around 600,000 employees today. But the flat rate subsidy
of £680 per employee per month (in today’s prices) – paid for up to a year,
with the possibility of a further six months at half rate - was less than half the
average amount likely to be paid under JRS. In view of this, and the sheer
scale and economic uncertainty caused by the Covid-19 crisis, one might reasonably
expect to see something more like 4% to 5% of private sector employees, 1.2 to
1.5 million people, to be covered. This converts into a gross cost to the
Exchequer of between £1.8 and £2.2 billion per month for as long as JRS is
fully operational.<o:p></o:p></span></a></div>
<span style="mso-bookmark: _Hlk35787641;"></span>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<a href="https://www.blogger.com/null" name="_Hlk35787897"><span lang="EN-US" style="font-size: 12.0pt;">Evaluation based
estimates suggest that approximately half the jobs retained by employers under
TES and TSTWCS would have been retained without them. It’s difficult to judge
if this offers any meaningful guide to the merit of JRS given that so many jobs
are potentially at risk in the current crisis. All one can say is that there is
a trade off between making the JRS administratively robust and the need to
introduce it as quickly as possible. In current circumstances policy perfection
seems less important than urgent action. <o:p></o:p></span></a></div>
<span style="mso-bookmark: _Hlk35787897;"></span>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">All job retention schemes also raise concerns about
possible negative effects on labour productivity. When applied as temporary
measures during economic crises, such schemes are explicitly designed to
sacrifice productivity in favour of employment in the short-term. The primary aim
is to both reduce the social cost of joblessness and aid subsequent economy
recovery by ensuring that attachment between employers and employees is
maintained so as to preserve employee skills and experience. Ultimately,
however, subsidies need to be withdrawn lest employers become dependent upon
them and/or labour productivity be constrained by employees failing to move
from less productive to more productive activities. I doubt if too many
economists are greatly worried about this in the current crisis but it will be
a consideration when Covid-19 is finally behind us and JRS is withdrawn. The
end of TES in 1979 is thought to have exacerbated the big shake-out of
manufacturing jobs in the early 1980s, which resulted in improved productivity
but also gave rise to considerable social adjustment problems.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoNormal">
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<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-42703039695181610282020-03-17T09:12:00.000-07:002020-03-17T09:12:48.149-07:00Initial thoughts on Covid-19 and UK jobs<br />
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Earlier today the UK’s Office for National Statistics (ONS)
published its latest monthly report on the state of the labour market. These
fairly healthy figures mostly refer to the period up to January 2020, before coronavirus
Covid-19 spread beyond China to achieve pandemic status. This is therefore one
of those times when our positive rear mirror view of the labour market offers
little comfort given what we anticipate will obviously be a very rocky road
ahead. <o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Employment was growing strongly at the start of the
year (up 184,000 in the three months to January, reaching a record equaling rate
of 76.5%). This was not enough to prevent a rise of 63,000 in unemployment – with
the jobless rate also up slightly to 3.9% - but only because of a big fall of
175,000 in the number of people leaving economic inactivity in order to seek
jobs. There were more jobs in both the private (up 169,000) and public (up 15,000)
sectors and although the rate of growth in average regular weekly earnings
slowed to 3.1% this delivered 1.5% real terms pay growth. However, it now looks
inevitable that the global and local economic impact of the coronavirus on
aggregate demand will hit the labour market with at least as much immediate
force as the Great Recession just over a decade ago. <o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">It’s too early to assess how much of the impact will
fall on jobs as opposed to cuts in hours of work or pay and it will be a few
months before the outcome starts to register in ONS figures. Previous recent experience
suggests that such a mega shock to the economy has the potential to reduce
total employment by between 500,000 and 1 million. But we don’t really know how
the global economic supply and demand side dynamics triggered by a natural phenomenon
like Covid-19 will actually play out, nor how effective traditional tools of
economic management will prove to be in coping with the effects even if wartime
levels of financial firepower are devoted to the struggle. <o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Moreover, assuming government action succeeds in providing
enough support to ensuring that fundamentally strong businesses survive to
fight another day, there will still be a shortfall in demand for labour while
the crisis lasts. It is thus difficult to be optimistic about job prospects in
the short-run.<o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Low unemployment at the onset of the crisis offers
some hope that employers will adjust to falling demand in ways that avoid mass
layoffs for fear of not being able to recruit staff once the malaise has eased,
albeit the weakening of employment protection legislation by the Coalition
government between 2010 and 2015 risks a bigger shake-out of jobs than
experienced in the recession of 2008/9. Similarly, initial indications suggest
that jobs are particularly vulnerable in consumer facing private sector
services affected by restrictions on travel or public gatherings. These sectors
are not only major employers, the driving force of the so-called ‘jobs miracle’,
but also make considerable use of flexible contract workers who are relatively
easy to stand down when demand falls. Remember, what the flexible jobs market
giveth, it can easily taketh away. <o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Either way, perhaps the best we can expect, assuming an
optimal fiscal, monetary and welfare policy response, is a very sharp rise in
unemployment (or some combination of higher unemployment and increased economic
inactivity) throughout much of 2020 followed by an equally sharp fall in 2021,
if by then the deadly potency of Covid-19 has finally started to subside.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com6tag:blogger.com,1999:blog-4855099503899043279.post-62735315223113443592020-03-01T07:02:00.000-08:002020-03-01T07:02:03.616-08:00"Thanks for having me!" - No Thanks!<br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">Admit it, we all have our pet
hates. Mine are too many to mention. But I’m particularly bugged by a new one.
Listen to almost any broadcast media interview – TV, radio, podcast – and you’re
likely to hear the interviewee begin by excitedly proclaiming “Thanks for having
me!”. This tendency has crept in steadily during the past decade, at first
gradually, latterly becoming ubiquitous, seemingly spreading faster than the
coronavirus.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">I’m not sure how the infection
started. I think we can rule out a sudden outbreak of politeness, since the
opposite seems to be the case for other forms of public discourse in the social
media era. My hunch is that professional media training is the initial source.
Presumably some former hack, gainfully employed teaching fledging advocates how
best to get their point across, found members of focus groups responded favourably
to interviewees who sounded grateful to be on the airwaves. If so, I reckon there
are probably as many people who, like me, immediately dismiss the views of those
who express such fawning gratitude.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">When my children were young,
their friends would invariably say “thanks for having me” at the end of a party
or the morning after a sleepover. This was rightly courteous and I expected my
own kids to behave likewise. But adults conversing in the public sphere should
grow up and demonstrate greater confidence in themselves.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">People are invited onto TV or
radio programmes because the producers of such programmes consider their contribution
of some value in terms of expertise or news worthiness. They are not being
offered a favour or treat, so why behave as if they are?<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">I fear this reflects a wider trend
toward thinking of news and current affairs broadcasting as a branch of the
entertainment industry. The wag who once quipped that politics is showbiz for
ugly people might now also conclude that media appearances give a taste of
c-list celebrity to academics, experts and commentators. Worst of all in this
respect is the egotistical contributor who flags-up an appearance with pre or
post interview tweets, maybe with a selfie alongside their interviewer thrown
in for good measure.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">I long for a return to
seriousness, with interviewees aware that they have both a serious role to
perform and are deserving of being heard because they bring something important
to the interview. Assuming this task is fulfilled, it is the interviewer, and
the listener, who should be giving thanks. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-19836321217057116052020-01-27T05:31:00.000-08:002020-01-27T05:31:51.584-08:00Bye, Bye EU - some thoughts at the time of Brexit<br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">I haven’t blogged for quite a
while. Brexit Limbo sapped my enthusiasm, not to mention the seeming
pointlessness of expressing a measured opinion in a time of polarised debate. But
with the UK’s departure from the EU due to begin in earnest late on Friday this
week I feel ready to start writing again, not just on economics but on anything
that takes my fancy (you have been warned!).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">As for Brexit itself, I’m neither
happy or too sad. I voted Remain in the 2016 Referendum because the risks of leaving
a powerful trading bloc after decades of integration look considerable when
compared to any proposed benefits. Not surprisingly, therefore, I won’t be
rejoicing with the pro-Brexit enthusiasts as they dance around Big Ben or whichever
alternative percussive devices are available. Yet I won’t be crying into my
favourite high strength Belgian beer, either. This is partly because, like it
or not, Brexit respects the outcome of the Referendum. I always opposed a
second vote, which smacked of telling people that their vote only counted if it
delivered the ‘correct’ (i.e. pro-Remain) choice. In addition, however, I have
always been a rather reluctant European, a pragmatist rather than a Europhile.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">I was only 16 when the UK joined
the European Economic Community and to be honest not that interested (my social
hinterland being somewhat wider than that of today’s kid’s army of wannabe
Greta Thunbergs). By the time I went to university the 1975 Referendum had given solid public support to membership of the ‘Common Market’, any debate
amongst my undergraduate associates on the subject largely confined to whether within
the European fold the UK would steer more toward the Social Market or Social
Democracy.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">Thatcherism then totally upset
the apple cart by demolishing the UK’s post-war settlement, with those like me opposed
to a de-regulated free-for-all turning enthusiastically to the EU to safeguard
minimum standards, notably in the realm of individual employment rights at a
time when collective rights were being watered down. But this often created as
many tensions as it solved. UK business culture and the legal system never
really gelled with continental norms, creating frictions that tested the guiding
EU principle of subsidiarity to the limit. Moreover, anybody who has sat
through EU deliberations on policy matters would surely attest the clash
between the plain-speaking British empiricist culture and the esoteric philosophical
language favoured by representatives of some of the other powerful member
states.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">As my experience of such matters
developed, my inclination leaned firmly toward a Europe consisting of trading relations
between independent nation states. But it was difficult to swim against the
prevailing tide of my pro-Maastricht contemporaries who increasingly took an almost
Panglossian view of all things European to argue that nirvana lay in full-blown
economic and monetary union and closer, not looser, political integration. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">My underlying reservations nonetheless
grew stronger in the early 2000s. Having initially been persuaded of the merits
of the Euro currency, it became apparent that the institutions and rules
governing the eurozone were more likely to stifle than support economic growth
and employment (a view reinforced by the subsequent turmoil experienced by several
member states after the 2008 financial crisis). The UK had been wise to remain
outside. Then in 2004 came EU enlargement. This in itself made sense. But I seriously
doubted the wisdom of extending the principle of freedom of movement of labour
to a bloc of countries with such a wide divergence of income levels. I remain
convinced that the resulting mass migration of EU labour to the UK is the main
reason why Vote Leave won the Referendum in 2016.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 107%; mso-bidi-font-weight: bold;">As a pragmatic Remain voter, I would
prefer a reformed EU to Brexit. But we are where we are and the imperative now is
to make the most of Britain’s post-Brexit future. Some fellow Remainers, especially
the most ardent Europhiles, will doubtless be tempted to run a rhetorical Re-join
campaign. I would rather they campaign instead for a Better Britain. <o:p></o:p></span></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-41106584437989820342018-02-21T02:31:00.000-08:002018-02-21T02:31:06.377-08:00UK labour market gets even more puzzling<br />
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Judging by the latest official figures for the final quarter of 2017, published this morning by the Office for National Statistics, you clearly can’t have it all in the UK labour market
at the moment. And the economic puzzles get even more perplexing. </span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;"><br /></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Pay growth,
the source of most of the bad news in recent months, picked up from 2.3% to
2.5% at the end of 2017 when measured by growth in average weekly earnings excluding
bonuses. The corresponding real pay squeeze in turn eased, from a cut of 0.5%
to 0.3%. But while this might suggest either a tightening in market conditions
or an improvement in labour productivity, the opposite has happened. </span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;"><br /></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">The rate
of job growth slowed in the final quarter of last year (the economy added only 88,000
net new jobs), unemployment increased by 46,000, the total number of hours
worked fell by 0.3%, while growth in output per hour worked (i.e. labour productivity)
dipped from 0.9% to 0.8%. </span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;"><br /></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">In other words, a labour market that struggled to
boost pay when getting tighter, just saw pay strengthen when conditions got a
bit weaker. This pattern is difficult to explain, though may become clearer as
more data become available. However, it clearly adds to the conundrums facing
economists, not least those at the Bank of England when they next consider if
and when to raise interest rates. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<br />John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com71tag:blogger.com,1999:blog-4855099503899043279.post-79005034874109871872018-01-24T02:53:00.002-08:002018-01-24T03:21:33.284-08:00Latest ONS Jobs Report offers a very mixed yet familiar picture of the UK labour market <span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;">The UK Office for National Statistics this morning published its latest release of data on the state of the labour market (which British commentators, influenced by the US BLS monthly equivalent, increasingly refer to as the official UK 'Jobs Report'). These latest (mainly rolling quarterly) data relate mostly to the three months to November 2017.</span><br />
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;"><br /></span>
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;">The picture painted by the release is very mixed.</span><br />
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;"><br /></span>
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;">After
a period of contraction in the overall size of the UK workforce, the number of
people participating in the labour market expanded by 99,000 to 33.64 million in the latest quarter,
mostly due to a fall of 79,000 in the number previously economically inactive. </span><br />
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;"><br /></span>
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;">Employers who have recently been struggling to hire staff took full advantage
of this, enabling employment to rise by 102,000 to 32.21 million, lifting the employment rate back to a joint record high of 75.3%. But</span><span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;"> with job creation only
slightly higher than growth in the labour supply, unemployment is little
changed (down just 3,000, at a rate of 4.3%). As a result, the degree of
tightness in the labour market is also unchanged, although with the balance of
job creation in the latest quarter tilted strongly toward full-time jobs for
employees (up 173,000) and away from self-employment (down 82,000) the rate of
growth of average weekly earnings excluding bonuses has ticked-up to 2.4%. </span><span style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;">Unfortunately, however, higher price inflation at the end of 2017 more than
wiped out this improvement, intensifying the squeeze on real wages which fell
by 0.5%. </span><br />
<span style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;">The resulting pattern is thus very familiar – record jobs and a low
rate of unemployment but still less spending power for the average worker.</span>John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com4tag:blogger.com,1999:blog-4855099503899043279.post-24648882378583912372017-12-13T03:04:00.000-08:002017-12-13T03:06:02.581-08:00Falling UK employment - a labour supply story<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;">The latest official UK jobs figures (for August to October 2017) show a quarterly fall
of 56,000 in the number of people in work (lowering the employment rate from 75.3% to 75.1%), a small fall in the number unemployed
- leaving the unemployment rate steady at 4.3% - and a very slight pick-up in nominal pay growth (i.e. average weekly earnings excluding bonuses) to 2.3%, with real pay once again fallen by 0.4% once adjusting for consumer price inflation.</span><br />
<span style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;">However,
although the figures suggest the jobs boom of recent years has come to end this
is due to emerging weakness in the supply of employable people to the labour
market rather than a fall in demand from employers. </span><br />
<span style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;">Redundancies are still on
the decline (down 11,000 on the quarter) and unfilled vacancies have risen to yet another record high of 798,000; but the
rapid growth in labour supply of recent years has seemingly gone into the reverse.
The total labour supply as measured by the economically active population aged 16 and over fell by 82,000 in the quarter. The main reasons for this are a sudden surge in economically inactive student numbers (up 35,000, 1.5% on the quarter ) and a fall in
the number of citizens of the central and eastern European countries (the A8) that
joined the EU in 2004 (the number of people born in these countries fell by 35,000, -3.2%, in the year to the third quarter). </span><br />
<span style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;"><br /></span>
<span style="font-family: "arial" , sans-serif; font-size: 12pt; letter-spacing: -0.25pt;">In principle, this drop in available labour should be
good news for unemployed jobseekers. The steady unemployment rate may therefore
indicate a lack of employability on the part of the remaining pool of
unemployed. Assuming no overall weakening of demand for workers, or renewed
growth in supply, the labour market is thus likely to show greater signs of
tightening in the coming months which, fingers crossed, should mean somewhat better
news on the pay front.</span>John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com4tag:blogger.com,1999:blog-4855099503899043279.post-8069451082237700342017-11-15T02:41:00.000-08:002017-11-15T02:41:45.369-08:00Much better news on UK labour productivity offers hope for better pay prospects in 2018<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">The latest official jobs and productivity figures, published earlier this morning by the Office for National Statistics, suggest that
UK employers are finally having to respond to much tighter labour market
conditions as the economy edges closer to full employment. </span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;"><br /></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Although the economy
continued to grow, there was no net hiring in the third quarter of the year (total employment fell marginally, by 14,000),
with businesses cutting full-time jobs and switching to increased use of part-time
workers. The combination of an overall fall in total hours worked (down 0.5%) and continued
growth in output saw a very welcome quarterly surge in output per hour of 0.9%
- the fastest rate of growth in labour productivity for six years. For the time
being there is still no sign of a corresponding improvement in pay, with growth
in average weekly earnings steady at 2.2% and real earnings still falling
against a backdrop of high consumer price inflation. However, the likelihood of sustained
improvement in productivity as employers continue to adjust to tighter labour
market conditions offers hope of better pay prospects in the coming years
albeit we are unlikely to enjoy job growth at the rapid pace seen since 2012.<o:p></o:p></span></div>
John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com2tag:blogger.com,1999:blog-4855099503899043279.post-26294925270860395982017-10-18T02:38:00.002-07:002017-10-18T02:38:46.588-07:00Women drive latest rise in UK employment as pay growth disappoints yet again<span lang="EN-US" style="font-family: "Arial",sans-serif; font-size: 12.0pt; letter-spacing: -.25pt; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">The UK jobs boom continues according to the latest Office for National Statistics figures - mostly covering the three months to August 2017 - published earlier this morning </span><br />
<span style="font-family: Arial, sans-serif; font-size: 12pt; letter-spacing: -0.25pt;"><br /></span>
<span style="font-family: Arial, sans-serif; font-size: 12pt; letter-spacing: -0.25pt;">Job growth in the latest quarter is driven mostly by women who account for more than 8 in 10 of the total net increase
in employment of 94,000 (taking the overall employment rate to 75.1%) . Almost all these additional women in work are in
part-time jobs, split fairly evenly between part-time female employees (up
42,000) and part-time female self-employed (up 45,000). Men by contrast have
seen a rise of 29,000 in the number working full-time offset by a fall of 13,000
working part-time. However, although this overall degree and make-up of
employment growth is good for the unemployment figures – with the unemployment
rate again at a 42-year low of 4.3% – it is failing to exert leverage on growth in
average weekly earnings (excluding bonuses) in either cash terms (running at an annual growth rate of 2.1%) or real terms (down 0.4% on the year). While the headline
jobless and price inflation rates imply the economy needs a small interest rate
rise, the pay growth figures say ‘not quite yet’.</span>John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-48266306862432580952017-09-13T02:38:00.001-07:002017-09-13T02:38:06.376-07:00Mirror image of recent job gains and losses could signal future pattern for UK labour market<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">The UK Office for National Statistics has just published its monthly labour market report, mostly covering the three months to July 2017</span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;"><br /></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">The latest figures once again show a healthy
rise in employment (up 181,000 in the most recent quarter, to a rate of 75.3%), a further fall of
75,000 in the number of people unemployed (down to a rate of 4.3%) and 107,000 fewer economically
inactive (down to 21.2%), yet still no sign of any sustained upward momentum in the cash value
of average weekly earnings resulting in a 0.4% fall in real wages. This remains
a jobs boom without a feel-good factor.<o:p></o:p></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<br />
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Although the real wage squeeze caused by the inflationary
impact of the fall in the value of the pound is the most obvious symptom of
Brexit uncertainty on the labour market, there are signs of a Brexit effect in
the recent pattern of job gains and losses. The more competitive exchange rate
has given a boost to manufacturing jobs, up 34,000 in the second quarter, but
there are signs of weakness in the real estate sector where the number of jobs
fell by 34,000. The consequences of the real wage squeeze for consumer spending
may also be putting pressure on the arts, entertainment and recreation sector,
which shed 30,000 jobs in the quarter. This kind of mirror image effect could
be an early pointer to a post-Brexit future of winners and losers in the UK job
market. <o:p></o:p></span></div>
John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com1tag:blogger.com,1999:blog-4855099503899043279.post-45047516912664049882017-08-16T02:54:00.002-07:002017-08-16T02:58:14.821-07:00Latest official UK Jobs Report tells a good news-bad news story on EU migration and Brexit<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">For regular readers of the UK Office for National Statistics (ONS) monthly release of official labour market statistics, the latest 'Jobs Report' published earlier this morning will have a distinctly familiar feel. </span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;"><br /></span></div>
<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">Another record
number and proportion of people in work (up 125,000 in the latest quarter to 32.07 million or 75.1%),
the unemployment rate down to a 42 year low of 4.4%, combined with anemic average regular weekly nominal wage growth at 2.1% and falling real wages, down 0.5%. The
unemployment rate continues to scream tight labour market and near full
employment, but pay points to continued slack and poor productivity growth (output
per hour worked having fallen by a further 0.1% according to the ONS’ latest
flash estimate). The UK jobs market is thus performing very well but still far
from ‘strong’ in a meaningful sense of the word.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">In terms of detail, the continued rise in the employment rate of EU
nationals working in the UK to 80.8% over the past year is a good news-bad news
story. On the one hand, although the inflow of EU migrants has slowed considerably compared with recent years, it indicates that the Brexit vote has not overall
deterred migrants from entering the UK to fill job vacancies. But on the other
hand it further highlights the dependence of many UK employers on the
free movement of EU labour and thus the possible negative consequences of a
hard Brexit deal.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">Finally, while the annual fall of 20,000 to 883,000 in the number of
people on a zero-hours contract in their main jobs leaves the proportion of
zero-hours contract workers in total employment unchanged at 2.8%, it now looks
as though the proportion peaked last year at 2.9%. It is unclear, however, if
this reflects a change in the underlying economic conditions faced by employers or a
response to popular pressure on firms to offer staff greater security over
hours and incomes. <o:p></o:p></span></div>
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John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com1tag:blogger.com,1999:blog-4855099503899043279.post-11771283169628803502017-07-12T02:30:00.001-07:002017-07-12T02:30:03.853-07:00UK workers experiencing Brexit uncertainty in the shops rather than the jobs market <div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">It's official UK Jobs Report day again, this month's data release from the Office for National Statistics mostly covering the period March to May 2017 </span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">The UK jobs market continues to outperform the wider
economy with employment rising (up 175,000 to a record high rate of 74.9%) and unemployment falling (down
64,000 to a 42 year low rate of 4.5%) in the latest quarter, defying the background of slower GDP growth. May
also saw a welcome pick-up in average regular weekly pay growth from 1.8% to
2.%. </span><span style="font-size: 12pt; text-indent: 0cm;">But what a buoyant labour market giveth, much higher price inflation has
more than taketh away, with average real weekly wages falling by 0.5%. </span></div>
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<span style="font-size: 12pt; text-indent: 0cm;">For the
time being therefore any negative effect of Brexit uncertainty on the UK
workforce is coming indirectly via the higher prices people are facing in the
shops rather than directly in terms of a dampening impact on job opportunities
or pay packets. However, the longer the real wage squeeze continues the greater
the risk that weaker demand for goods and services will feed through to weaker
demand for labour and lead to lower business investment, thereby further
reducing the prospect of a productivity led boost to real incomes. </span><span style="font-size: 12pt; text-indent: 0cm;"> </span></div>
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John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com1tag:blogger.com,1999:blog-4855099503899043279.post-58241935823681106482017-06-14T02:52:00.001-07:002017-06-14T02:52:38.633-07:00UK pay squeeze starting to feel more like a bite<div class="MsoBodyText" style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-size: 12.0pt;">We knew the UK was entering another prolonged period
of falling real wages but the latest official Jobs Report from the Office for National Statistics suggests the squeeze
is starting to feel more like a bite. The growth rate of average weekly earnings excluding bonuses slowed to just 1.7% in cash terms in April and fell by 0.6% when adjusted for the
corresponding rate of consumer price inflation. The nominal and real figures including bonuses were 2.1% and -0.4% respectively.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">What’s remarkable is that pay growth, however
measured, is so weak at a time when employment is at joint record rate of 74.8%, unemployment at a 42 year low of 4.6%, and the working age inactivity rate down to 26.5%. </span></div>
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<span lang="EN-US" style="font-size: 12.0pt;">Moreover the rise in employment in the latest quarter is driven almost entirely by relatively strong growth in full-time jobs for employees on
permanent contracts. This, on the face of things, doesn't look like a surge in the so-called gig economy. The total rise of 109,000 in the number of people in work in the three months to April comprised a rise of 196,000 employees working full-time, a fall of 69,000 employees working part-time, a fall of 24,000 full-time self-employed and a rise of 26,000 part-time self-employed. The number of temporary employees fell by 17,000 and the number of part-time workers unable to find a full time job fell by 39,000. All the net employment growth in the first quarter was in the private sector.</span></div>
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<span style="font-size: 12pt; text-indent: 0cm;">However, despite the overall very positive news on jobs the weak and weakening pay figures are the key take-away from today's ONS report. Hard times for people in work and near full employment make strange bedfellows,
highlighting the extent to which a de-regulated labour market with an abundance
of workers available to fill low wage vacancies has altered the UK jobs
landscape.</span><span style="font-size: 12pt; text-indent: 0cm;"> </span><span style="font-size: 12pt; text-indent: 0cm;"> </span><span style="font-size: 12pt; text-indent: 0cm;"> </span><span style="font-size: 12pt; text-indent: 0cm;"> </span></div>
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John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com1tag:blogger.com,1999:blog-4855099503899043279.post-33151842379643378282017-05-17T02:29:00.001-07:002017-05-17T02:31:43.631-07:00Underlying pay growth slows and average real weekly earnings fall as productivity takes a hit despite 42 year low in UK unemployment rate<div class="MsoSubtitle">
<span style="text-indent: 0cm;">The UK </span><span style="font-size: 12pt; text-indent: 0cm;">Office for National Statistics (ONS) has just released its latest monthly jobs report, including data mostly covering the three months to March 2017. This is the last set of official labour market figures to be published before the General Election scheduled for 8 June.</span><span style="font-size: 12pt; text-indent: 0cm;"> </span></div>
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<span lang="EN-US" style="font-size: 12pt;">Employment is up again by 122,000 (all full time jobs, mostly for employees) to a new record rate of 74.8% while unemployment is down 53,000 to a 42 year low of 4.6%, with job vacancies also at a record level. Yet with labour productivity estimated to have fallen by 0.5% in the first quarter of the year the underlying rate of growth in average weekly earnings (i.e excluding bonuses) has dipped to 2.1%, a real terms fall of 0.2% when adjusted for the corresponding rate of consumer price inflation. </span></div>
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<span lang="EN-US" style="font-size: 12pt;"><b>This is a jobs market that looks better on paper than it feels in the pocket,</b> reflecting a structural shift in the types of work people do and the relative bargaining power between workers and bosses. No wonder workers’ rights, productivity and pay rather than the availability of jobs per se, is a key battleground in the UK General Election campaign. </span></div>
John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com0tag:blogger.com,1999:blog-4855099503899043279.post-45739002695366172152017-04-12T02:41:00.000-07:002017-04-12T02:43:32.651-07:00How low can the UK jobless rate safely go?<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;"><br /></span>
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;">According to the latest official data (mostly covering the three months to February 2017) just released by the Office for National Statistics, the UK labour market continues to enjoy a robust
sustainable expansion. </span><br />
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;"><br /></span>
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;">There were 39,000 more people in work (mostly full-time) in the
latest quarter plus a record number of job vacancies (767,000), 45,000 fewer unemployed and 10,000
fewer economically inactive alongside an easing in pay pressure. </span><br />
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;"><br /></span>
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;">A joint record
employment rate of 74.6%, an unemployment rate at a 42-year low of 4.7% and
almost zero (0.1%) growth in real average weekly earnings illustrates a
remarkable structural change in the operation of the UK labour market compared
with earlier decades. </span><br />
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;"><br /></span>
<span lang="EN-US" style="font-family: "arial" , sans-serif; font-size: 12.0pt; letter-spacing: -0.25pt;">This particular combination of jobs and pay suggests that
the unemployment rate could fall much further, perhaps below 4%, without triggering
troublesome pay inflation. While the effect of Brexit uncertainty on the demand
side of the economy might yet result in a temporary rise in unemployment later
this year, full employment is thus now a more realistic prospect for the UK than at
any time since the early 1970s.’ </span>John Philpotthttp://www.blogger.com/profile/10996575745616361992noreply@blogger.com5