It’s a wonderful set of official jobs figures as housing market recovery helps lift number of people in work in UK above 30 million for the first time

The Office for National Statistics (ONS) has released the latest set of UK labour market data, mostly covering the three months to October this year. Christmas always brings us a showing of ‘It’s a Wonderful Life’ but this year the ONS has added to the festive mood by giving us a wonderful set of official jobs figures.

The quarterly 250,000 net increase in total employment is a big as one might once have expected in a full year. Employment is up in all parts of the UK, except Northern Ireland which saw a slight fall in the quarter, with a sharp rise in job vacancies helping an additional 50,000 16-24 year olds into work. And while the overall figure of more than 30 million people in work still leaves the UK employment rate (72%) below the pre-recession rate (73%) it is a landmark worth celebrating, as is the record 10% of over-65s with jobs.

The private sector (employees and self-employed) accounts for the bulk (246,000) of the increase, with jobs in real estate (up 16,000, +2.8% and construction (33.000, +1.6%) particularly strong in the latest quarter, indicating the degree to which the housing market is a key propellant of the UK’s current economic recovery, though manufacturing added 17,000 more jobs too. But surprisingly even the public sector has added 4,000 jobs this quarter, due entirely to net hiring of 10,000 by the NHS. In this context, even the further increase of 25,000 in the number of people working part-time who want a full-time job (to a record high of 1.472 million) may conceal an element of good news if it means more part-timers think there may be more full-time work to be had.  

Equally remarkable is the 99,000 quarterly drop in unemployment, unemployment falling everywhere apart from in London, the South West and Northern Ireland. Especially pleasing is the 19,000 fall in youth unemployment and the 33,000 fall in the number of long-term unemployed. And the number of Jobseeker’s Allowance claimants is down by 36,700 in November. With the unemployment rate now at 7.4% - lower than at any time since 2009 - analysts might have to revisit the odds of the rate falling below 7% sometime next year.

By contrast, the average earnings figures take some of the Christmas sparkle off the jobs figures, with employers keeping a Scrooge like grip on regular pay increases which on the measure published by the ONS today continue at a sub-inflation rate of just 0.8%. However, the alternative ASHE measure published by the ONS last week suggests that earnings might be rising somewhat faster than this, so maybe the New Year will bring a bit more cheer on the pay front too.

Puzzling ASHE data alters the narrative on cost of living crisis, the ‘squeezed middle’, and regional labour market pressures

The Office for National Statistics has just published the provisional findings of the 2013 Annual Survey of Hours and Earnings (ASHE).  There are a number of surprises and puzzles.

The growth in median weekly earnings of 2.6% for all employee jobs (full-time and part-time) between spring 2012 and spring 2013 is considerably higher than the corresponding figure of 1% pay growth indicated by the ONS’ average weekly earnings statistics. The median increase for part-timers (3.1%) was higher than that for full-timers (2.2%), while median hourly earnings increased by 3.4% for part-timers and 2% for full-timers. Although the ASHE findings show pay growing more slowly than CPI inflation (2.4% in April 2013) they therefore suggest a less severe average real pay squeeze and a more limited cost of living crisis than previously thought.

The still very wide hourly pay gap between the top and bottom 10% of earners stabilized last year (both groups seeing a 1.5% pay increase between 2011 and 2012) but middle earners did better, median hourly earnings rising by 2%. The ‘squeezed middle’ were thus less squeezed than higher and lower earners last year. However, the hourly gender pay gap for full-time employees widened again, up from 9.5% to 10%. And median weekly earnings grew by more for private sector (2.3%) than for public sector (1.6%) workers.   

A particularly puzzling feature of the ASHE findings is that they show growth in median weekly pay across the UK regions between 2012 and 2013 to be a mirror image of regional unemployment rates, with unemployment hot spots registering the biggest pay rises. For example, the North East (3.5%), West Midlands (3.3%) and Wales (4.4%) saw much stronger pay growth than regions with less unemployment, with the South East registering no pay growth at all. While the reasons for this require much closer examination – and remember pay levels are higher in low unemployment regions -  the much commented upon post-recession tendency for workers to ‘price themselves into jobs’ does not therefore appear to be evident for all regions in these latest data.

OBR forecasting a ‘jobs rich/pay tight’ outlook for the economy

We’ve just had the Autumn Statement by the Chancellor of the Exchequer and the latest Office for Budget Responsibility (OBR) economic and fiscal forecast:    

As expected, the OBR is more optimistic about prospects for the UK economy in 2013 and 2014 than forecast at the time of the Budget, though it is slightly more pessimistic about the period from 2015 to 2017. While the Chancellor emphasized the OBR’s positive message for this year and next, the OBR is in fact therefore still forecasting a rather subdued outlook for the UK economy for much of the rest of the decade. Moreover, the short-term improvement is driven by higher than expected household consumption, with business investment and net exports weaker than forecast at the Budget. As a result the economy remains on an unbalanced and low productivity growth trajectory.  

Despite this the OBR has become considerably more optimistic about the outlook for both employment and unemployment, which is expected to fall to 7% by the end of 2015. However, this welcome outcome is due to continued weakness in pay growth in the private sector and much slower pay growth in the public sector. The recovery is thus forecast to be ‘jobs rich but pay-tight’. Average earnings are forecast to rise by only 2.6% in 2014, with subsequent improvement still below the rate prevailing prior to the recession, although with CPI inflation forecast to fall back to the target rate of 2% by 2016, the OBR is forecasting an end to the squeeze in real earnings.

Slower than expected public sector pay growth means that the OBR is now forecasting slightly fewer public sector job cuts than at the Budget. But even on the latest forecast, general government employment is forecast to fall by 1.1 million between 2010 and the end of the forecast period and by 720,000 during the current Parliament.

The Chancellor’s announced welfare and employment measures targeted at the young unemployed are welcome but the impact remains uncertain. For example, the cut in employers’ National Insurance contributions for under 21 year olds is likely to involve a considerable deadweight element – reducing the net impact on job creation – and may create a disincentive to hire young people aged between 21 and 24.  

Official jobs data and Bank of England forecasts reflect growing optimism on unemployment but offer little comfort on pay prospects

The Office for National Statistics (ONS) has released the latest set of UK labour market data, mostly covering the three months to September this year. The Bank of England has also published its latest quarterly Inflation Report.

The labour market data are unusually good – these employment figures offer the most optimistic reading since the start of the recession. Almost all the key indicators are pointing in the right direction. The number of people in work increased by 177,000 in the quarter (full-timers accounting for almost 90% of the increase). Unemployment fell by 48,000 to 7.6%, with welcome falls in both youth unemployment (down 9,000) and long-term unemployment (down 19,000). The only obvious downside is that underemployment has increased - the number of part-time workers who want a full-time job has risen to 1.457 million – while the 0.8% rate of growth in regular pay remains well below CPI inflation.   

The combination of much better jobs figures but continued weak pay growth also form the centrepiece of the Bank of England’s Inflation Report. The Bank is far more optimistic on economic growth and unemployment than it was in August, going as far as to suggest that there is an evens chance that the unemployment rate will fall below 7% by the end of next year. The outlook for inflation has also improved, with the 2% CPI target now within sight of the actual figure. However, the Bank remains rightly cautious about the extent of slack in the economy – as measured by both unemployment and underemployment - and prospects for renewed growth in productivity.  As long as underemployment and weak productivity growth remain the order of the day, workers can’t expect much in the way of pay increases even if lower price inflation eases the cost of living squeeze. So don’t be fooled into thinking that the welcome improvement in the jobs figures signals an early end to austerity.

Particular excitement about the chances of the unemployment rate falling below 7% - which the Bank today reiterated would not be a an automatic trigger for higher interest rates – has been caused by the ONS’ latest single month estimate of unemployment, which fell to just 7.1%. But analysis contained in the Bank’s Inflation Report demonstrates that sampling issues in the Labour Force Survey render these monthly estimates both volatile and unreliable. However, with unemployment now such a key indicator in the Bank’s policy of forward guidance on monetary policy, it is surely time for both the Bank and HM Treasury to instruct the ONS to enhance the Labour Force Survey so that reliable monthly estimates of unemployment can be made available. 

Record number in work but unemployment and pay figures tell a different story

The Office for National Statistics has released the latest set of UK labour market data, mostly covering the three months to August this year. The headline employment number is very good – the number of people in work increased by 155,000 (almost all of this full-time work) in the latest quarter and the level of job vacancies is at a five year high. The number of Jobseeker's Allowance claimants fell by more than 40,000 – the biggest monthly fall for 16 years.

However, the subsequent ‘record number in work’ headlines are a tad misleading – the employment rate remains well below the pre-recession peak. And while there are now more vacancies than in autumn 2008 there are still around a quarter fewer vacancies than before the recession hit in spring 2008.

As a result, these good employment figures are having relatively little impact on unemployment, especially youth (16-24 year olds) unemployment which is unchanged on the quarter at still close to 1 million. The overall unemployment rate remains very high at 7.7% and indeed jumped to 8% in the final month of the quarter. Meanwhile, underemployment, as measured by the number of part-time workers who want a full-time job has risen to a record level of 1.45 million.  

This continued high rate of unemployment and underemployment shows that the labour market is not tightening in any noticeable sense and, for the time being at least, remains an ‘inflation free zone’ as far as the Bank of England will be concerned. An unemployment rate of 7% or less, which might trigger an interest rate rise, still looks to be a distant prospect.

The underlying weakness of the labour market is reflected in a depressing fall in wage pressure, with growth in regular pay now running at just 0.8%, way below consumer price inflation at 2.7%. Workers in the public sector are now bearing the brunt of the real pay squeeze, adding to the pain imposed by job cuts in the order of 10,000 per month. This degree of real wage squeeze is not conducive to a strong and sustained recovery in the UK economy. The ‘cost of living crisis’ is an economic crisis.  

The UK’s short-run employment outlook: ‘jobs rich’ or ‘jobs lite’?

A lot of economists at present reckon the new Bank of England Governor, Mark Carney, is too pessimistic in his current expectation that it will be almost three years before the UK unemployment rate falls to 7% (a figure that has acquired totemic status in the emerging era of ‘forward guidance’ when it comes to assessing likely moves on monetary policy). Emerging optimism is based on recent evidence of stronger growth in both output and employment which in recent months has pushed the headline unemployment rate down to 7.7% - already considerably lower than most economists were originally forecasting for the end of 2013. A majority therefore think the 7% unemployment benchmark rate will soon appear on the horizon and be reached by the end of 2014.

This view seems based on the assumption that employment will continue to grow at close to the pace achieved in the summer months, and might even accelerate in the coming months if confidence about prospects for the economy improve still further. Surveys of employers’ hiring intentions – such as the latest Employment Outlook published today by the Recruitment and Employment Confederation – underscore this bullish mood, reporting that as many as 50% of employers intend to expand staff levels in the next quarter.

However, the Bank of England is likely to put at least as much weight on the reports of its own Agents, who talk to organisations around the country and produce a monthly report, the latest issue of which is also published today. This paints a somewhat different account of the short-run employment outlook.

According to the Bank’s Agents, while business activity has improved there were indications of only a ‘slight increase’ in staffing levels over the next six months. Overall, employment was reported to be rising only modestly, and by less than output, so that productivity was gradually improving (which is good news given the UK’s widening productivity gap with other economies, as referred to in my earlier blog this morning). Employment intentions were found to be weakest in consumer services (by far the biggest sector of employment in the economy) where employers were set to respond to increased demand by increasing employee hours rather than taking more staff on. Employment intentions were strongest in construction, a further sign of the degree to which the housing market is leading the emerging economic recovery.

Just why one sees such divergence in indicators of employment intentions is unclear. But if the Bank’s Agents’ report proves right we are heading for a ‘jobs lite’ rather than ‘jobs rich’ recovery, at least in the short-run. If so, at a time of continued strong growth in the supply of labour to the UK economy, it might take considerably longer than a year before we see the unemployment rate fall to 7%.              

Job growth driven by real wage squeeze pushes UK down international productivity ranking

The Office for National Statistics (ONS) this morning published its first estimate of how labour productivity in the UK compares with the other major industrialised economies (the G7).

The bad news is that the UK is falling fast down the international productivity ranking. Output per hour in 2012 was 16 percentage points below the average for the G7 major industrialised countries – the widest ‘productivity gap’ for almost two decades (since 1994). The relative improvement in the UK’s productivity performance from the mid-1990s to the late 2000s has clearly gone into reverse in an economy reliant on falling real wages, rather than increased output, as the main driver of employment growth. According to the ONS output per hour in 2012 would have been 15 percentage points higher had the pre-recession rate of growth been maintained. Though some of this latter growth may have been ‘illusory’ in that it was propelled by an unsustainable boom, the UK economy clearly needs in particular a strong resurgence of business investment in order to regain its pre-recession productivity mojo.   

The drop in the UK’s international productivity ranking in 2012 proves that strong employment growth fuelled by falling real wages is symptomatic of relative economic weakness rather than strength. While the real wage squeeze is preferable to even higher unemployment, these latest international productivity figures show the UK economy can’t be deemed to be experiencing a genuine recovery until we see firm evidence of both stronger output growth and rising real incomes.

UK HR workforce grows by 6,000 in each of past two years to reach 0.41 million

Last week the Office for National Statistics (ONS) published the annual snapshot of the UK’s occupational profile, as obtained from the Labour Force Survey (LFS) in the second quarter (April-June) this year. I’ve been comparing the numbers employed in each occupational category back to 2011 (reliable comparison with earlier data is not possible because of changes to way in which occupations are classified).

Those interested in the broader findings might like to see today’s Financial Times and The Telegraph. But given that many readers of this blog work are HR professionals I thought I’d focus here on the number of people employed in HR management and development roles.

According to the LFS there are currently 414,000 people employed as HR managers and directors (138,000), HR officers (130,000) or vocational and industrial trainers or instructors (146,000). The total is 6,000 (+1.5%) higher than in 2012, which was also 6,000 higher than the total in 2011. This is a healthy increase - in percentage terms just a little shy of the corresponding increase in total UK employment – especially since public sector HR has been under considerable pressure in recent years

However, all of the net employment growth since 2011 has been in HR manager and director (up 24,000, +21%) and HR officer (up 1,000, +0.8%) roles.  By contrast the training profession has taken a hit – down 7,000, -4.4% - perhaps also linked to public spending cuts but disappointing given constant business rhetoric about upskilling the UK workforce.

HR remains a strongly feminised sector. 6 in 10 people working in HRD are women – the proportion of women highest amongst HR officers (73%) and HR managers and directors (61%), though there are equal proportions of men and women in training roles.     

Adjusting for statistical re-classification the total UK HRD workforce is now around 60,000 (17%) bigger than in 2001 when these estimates were first provided on an annual basis. More people therefore now work in HR than in entire sub-sectors of the economy like agriculture, forestry and fishing, mining and quarrying and gas, electricity and water. This explains why HR professionals argue that improving the quality of HRD is important to the future prosperity of the UK. It also highlights the challenge facing the Chartered Institute of Personnel and Development (CIPD) and other bodies seeking to raise standards in the profession. The LFS estimates suggest that at most only 1 in 3 people working in HRD in the UK is a CIPD member. At a time when HR is struggling to maintain its reputation in the eyes of CE0s and employees alike, the CIPD in its centenary year still faces a major task in reaching out to the bulk of the UK’s expanding HR workforce. 

Estate agents lead the way as UK economy enjoys a summer jobs surge

It’s one of those bumper months for official labour market statistics. This morning the Office for National Statistics (ONS) published the latest quarterly household Labour Force Survey (LFS) estimates for May-July 2013, Jobseekers Allowance (JSA) claims for August 2013, the (largely employer based) Workforce Jobs estimates for June 2013, and public and private sector employment estimates for June 2013.     

This is by far the strongest overall set of official UK labour market figures this year and indicates that the summer surge in economic growth was accompanied by a jobs surge. Not only did the number of people in work increase by 80,000 in the quarter, according to the LFS Force Survey, but the ONS’s alternative quarterly survey of employers shows that businesses added 168,000 jobs between March and June. Moreover, all the quarterly net job growth was in full-time employment for employees on permanent contracts – the numbers of people working part-time (down 15,000), on temporary contracts (down 37,000) or self-employed (down 27,000) all fell.

Encouragingly almost all parts of the private sector added jobs, including manufacturing, but the stand out sector is real estate which saw a jump in employment of almost 10% (50,000) in the second quarter of the year, almost certainly a reflection of the recent resurgence in housing market activity.

The summer jobs surge was not matched by a corresponding fall in unemployment because more people entered the workforce. Indeed youth unemployment and male unemployment increased slightly (up 9,000 and 15,000 respectively), and the south of England performed generally better than the north. But the overall unemployment total did register a decent quarterly drop of 24,000 while the unemployment rate dipped to 7.7% (down from 7.8%), with the number of people long-term unemployed unchanged and the number claiming JSA falling by almost 33,000.       

The ONS figures also confirm that (adjusting for statistical reclassifications) the number of people employed in the public sector fell by 437,000 in the three years between June 2010 and June 2013. This already exceeds the initial (October 2010) Office for Budget Responsibility projection of 390,000 public sector job cuts for the entire five years of the current Parliament. With public sector employment set to continue to fall at a rate of more than 30,000 per quarter for several years to come, this illustrates the current speed and scale of public sector downsizing.

The ability of private sector job growth to easily offset public sector job cuts of this magnitude has been one of the most remarkable features of UK economic performance in recent years, though as today’s figures also make clear this is due in large part to the weakness of pay growth. The rate of growth of average earnings excluding bonuses fell from 1.1% to 1% between June and July. With unemployment still very high, pay increases show no sign of getting anywhere near the rate of price inflation any time soon – the big squeeze on living standards goes on and on.

A jobs recovery to write home about?

There is some good news in the latest jobs figures, published earlier today by the Office for National Statistics – 69,000 more people in work in the quarter April-June, a small fall of 4,000 in unemployment, 29,200 fewer people claiming Jobseeker's Allowance in July, 19,000 more job vacancies and 17,000 fewer redundancies. All this suggests that things are moving in the right direction, albeit volatility in the quarterly data make the underlying trend difficult to assess while the likely rate of progress in the remainder of the year remains uncertain. Independent surveys of employers' hiring intentions, including those published by the Chartered Institute of Personnel and Development earlier this week, suggest the news will remain broadly positive. Yet despite this there are enough worrying signs about the underlying state of the UK jobs market to dent the enthusiasm of those tempted to swallow uncritically the more upbeat economic narratives that have surfaced in recent weeks.      

The latest quarterly rise in employment is almost matched by an increase in the size of the workforce, which means the unemployment rate is unchanged at 7.8%, suggesting that the Bank of England might be right to think the jobless rate will remain above 7% for some considerable time yet. Corresponding population growth also means that the employment rate has more or less flat-lined since last autumn. Meanwhile, in line with the general trend of late, the number of men unemployed has increased by 15,000. Youth unemployment has also increased by 15,000 (on its way back toward the 1 million mark once more), with the number of 16-24 year olds in work sharply down by 92,000. Long-term unemployment has increased by 7,000 (to over 900,000) with the number of people unemployed for more than two years approaching half a million (474,000). 

Moreover, while job security might have increased a little (the quarter saw a big drop of 70,000 in temporary employment, suggesting that permanent posts account for all the net new jobs created between April and June) underemployment has also increased and the squeeze on pay has continued. The number of part-time workers who want a full-time job jumped 25,000 to 1.4 million in the quarter. And although the headline rate of growth of average earnings has increased to above 2%, regular pay (adjusted for bonus payments) is only rising at 1.1%, well below the 2.8% CPI inflation rate.

The headline jobs figures may continue to be broadly positive but one only has to dig a little deeper into the statistics to see that millions of people are still being hit by a combination of lack of jobs and a ceaseless sharp fall in the real value of their pay. This doesn't look or feel like an economic recovery to write home about. 

Rise in full-time employment and hours plus lower jobless rate is good news for UK labour market, though signs of underlying weakness remain

I’ve had a quick look at the latest labour market statistics from the Office for National Statistics, mostly covering the quarter March-May 2013. These are overall a good set of jobs figures, with the positives on balance stronger than the negatives. Employment is up by 16,000 on the quarter (though, alongside population growth, not by enough to prevent a fall of 0.1 percentage points in the employment rate) and unemployment has fallen on both the Labour Force Survey (down 57,000) and JSA benefit count measures (down 21,200 between May and June). The unemployment rate fell by 0.2 percentage points to 7.8%.

The best news of all is a strong quarterly rise in full-time employment of 28,000 and increased working hours (the number of people in part-time employment fell by 12,000). Alongside a fall in temporary employment (down 15,000) and self-employment (down 28,000), fewer redundancies (down 19,000) and more job vacancies (up 24,000), this suggests that confidence is returning to the jobs market with employers cutting back on contract workers in favour of permanent staff.

Overall women have again fared better than men in the latest quarter (14,000 more in work and 41,000 fewer unemployed, the corresponding figures for men being 2,000 and 16,000) and there has been a welcome fall in youth unemployment (down 20,000 for the 16-24 year age group as a whole although this is almost entirely due to a fall in the number of young people in full-time education seeking work – the number of young people in work actually fell by 31,000 on the quarter).

Less welcome is news that long-term unemployment is continuing to rise (up 15,000 on the quarter to a 17 year high of 915,000) and that the number of people of working age who are economically inactive is also increasing (up 87,000, though again this is partly due to fewer full-time students looking for work who are as a result classified as economically inactive rather than unemployed). Not everybody is therefore benefiting from the overall improvement in the labour market. 

Likewise, despite a slight increase to 1% in the rate of growth of regular pay, pay rises continue to lag well behind inflation (running at 2.7% on the CPI measure in the corresponding quarter), suggesting that our struggling economy is able to create more jobs only because people are desperate to price themselves into work. This is not a recipe for either economic or social well-being and should be viewed as a sign of continuing labour market malaise whatever the headline jobs and unemployment figures show. 

IFS study serves to rewrite UK narrative on pay, jobs and productivity

The Institute of Fiscal Studies (IFS) analysis, published today, of the interaction between pay, employment and labour productivity in the UK since the start of the financial crisis is the latest output from what’s becoming a cottage industry examining the so-called ‘productivity puzzle.’ John van Reenan at the LSE’s Centre for Economic Performance has done similar work, as has the TUC which published its report on the subject yesterday.

The broad conclusion to be drawn from all this analysis – which chimes with my own view as expressed in previous blogs - is that a combination of increased outsider power in the labour market, caused by an expanded supply of labour, and reduced insider power, resulting from the diminished influence of trade unions in the workplace, has altered the UK’s trade-off between real wages and employment. This changing trade-off is apparent in data stretching back a decade but has only really been noticeable since the start of the crisis with, as the IFS notes, real wages falling by more than in any comparable five year period and associated robust employment growth resulting in a big drop in productivity rather than a 10% unemployment rate.

We can debate until the cows come home as to how to view this. Few would argue that downward adjustment of real wages is preferable to a large shake-out of jobs when an economy is depressed. The IFS reiterates this, going on to note that as a result ‘the long term consequences of this recession in terms of labour market performance may be less severe than following the high unemployment recessions of the 1980s and 1990s.’ But what we don’t know is whether there will be lasting economic implications of a prolonged squeeze on real pay. A low rate of capital investment is the long-standing problem of the UK economy – thirty years of labour market deregulation has not been a spur to a high productivity economy and several years of falling real wages will surely diminish the incentive to invest still further.

However, what is most intriguing about the IFS analysis is that it to some extent rewrites the accepted narrative of how businesses responded to the recession. Back in 2010 it was widely asserted that CEO’s and HR managers in larger firms had learnt the lessons of previous recessions and were holding onto staff during the downturn rather than resorting to large scale redundancies. Although this meant a fall in productivity while order books were thin, and hence a rise in unit labour costs and a squeeze on profits, business could either meet this out of healthy cash reserves or keep a tighter rein on pay, aided by a more equable employment relations climate.  Small firms by contrast were said to be hit hard by restrictions in bank lending, and with little or no cash reserves to fall back on were cutting jobs, if not going to the wall. As a result the business lobby was calling on the incoming coalition government to freeze the National Minimum Wage and cut employment red tape, especially for small firms, to preserve jobs.   

In fact, the IFS finds, it was mainly larger firms who cut jobs whereas small firms were more likely to keep workers on at lower pay in order to limit the impact of a fall in productivity on unit labour costs. With credit hard to come by but labour getting cheaper, small firms instead cut investment rather than jobs, this probably further reinforcing the drop in productivity. The IFS shows that firms with fewer than 50 employees suffered a productivity fall of 7% relative to a pre-recession trend, compared to no change for firms with more than 250 employees.

All this suggests that an explanation for what’s happened to UK jobs, pay and productivity in recent years mainly revolves around the balance of power between bosses and workers in small firms, where employment relations are highly individualised and staff are most exposed to the availability of an abundant supply of people in the external labour market. It also suggests that the micro-economic policy response lies in easing credit constraints to small firms and supporting their ability to invest in physical and human capital in order to boost productivity, rather than further watering down of employment regulations which would simply reinforce the foundations of our low-pay, low productivity economy.   

Latest official jobs figures paint a mixed picture

The Office for National Statistics has released the latest set labour market data, mostly covering the three months to April this year. The headline labour market figures look slightly better than those in recent months, with total employment 24,000 higher than the previous quarter, total hours worked on the up and total unemployment down 5,000. There has also been an encouraging increase in job vacancies (reducing the average number of unemployed people per vacancy to below 5 for the first time for several years) while the number of people claiming jobseeker’s allowance has fallen by 8,600. The rate of growth in total weekly earnings has jumped from a paltry 0.6% to 1.3%. However, the underlying picture is more mixed.

The number of men in work has fallen by 14,000 with a further 63,000 men becoming economically inactive – the headline fall in male unemployment of 12,000 therefore masks a weakening labour situation for men. By contrast, the number of women in work has increased by 38,000 but this has coincided with a quarterly rise in female unemployment of 7,000, mainly because 33,000 stay at home mums entered the labour market. Similarly, the number of over-65s in work has increased by 38,000 – taking the total number of people in employment in this age group above 1 million for the first time – while employment amongst 16-24 year olds has fallen slightly (down 4,000). For men and women as a whole, the number of people long-term unemployed (i.e. jobless and looking for work for more than a year) increased by 11,000.

Private sector employment has increased by 46,000, driven by 21,000 more people becoming self-employed, but public sector employment continues to fall (down 22,000 in the first quarter of the year). Moreover, for the economy as a whole, the number of people being made redundant has increased. The underlying rate of fall in public sector employment continues to be slightly lower than Office for Budget Responsibility projections. This suggests either that the rate of public sector job cuts will accelerate between now and the General Election in 2015 or that the final net loss of public sector jobs will be somewhat lower than currently expected.

The regional pattern of ups and downs in the labour market is also mixed, with the West Midlands being the big loser in the latest quarter (the latter region suffering a fall in employment of 43,000 and an increase in unemployment of 19,000). But the UK’s ‘Celtic fringe’ is having a much better 2013, in marked contrast with the jobs drought outside of England in 2012. Employment is up by 43,000 in Scotland, 10,000 in Wales and 24,000 in Northern Ireland.  Unemployment is down in Scotland and Northern Ireland and unchanged in Wales.      

The improvement in pay growth is also slightly deceptive. Stripping out the effect of very large spring bonus payments for some workers in the private sector, the underlying rate of growth in weekly earnings (i.e. regular pay) remains weak at 0.9% and still well below the rate of price inflation.

Taken together, these mixed jobs figures suggest the UK labour market is experiencing a modest improvement compared with recent months, which is consistent with broader evidence for the economy as a whole. But the news is better for some groups of workers than others and with unemployment still at 7.8% and real pay being squeezed the hard slog continues for people at work and job seekers alike.

Do workless women deserve more attention than workless men?

When the global financial crisis first hit the UK labour market in 2008 it was widely expected that in our increasingly service based economy women were likely to suffer more than in previous recessions. Moreover, when the coalition government began to cut public spending in 2010 women were again expected to bear the brunt of the impact of job cuts given the relatively high proportion of women working in the public sector.

There is a widespread perception that these expectations have been, and continue to be, fulfilled. The Fawcett Society, a UK campaign group for women’s rights, talks of a ‘female unfriendly’ labour market.  Last week BBC Radio 4’s Woman’s Hour included an item on the particular difficulty faced by women aged over 50 in finding work. And the plight of women in the UK labour market has also been stressed in a recent report from the government sponsored Women’s Business Council “Maximizing Women’s Contribution to Economic Growth.” The report notes that over 2.4 million UK women are not in work but want to work, and also suggests that women are currently setting up new businesses at half the rate of men.

All this comes with repeated calls to government and employers to make a special effort to help more women into work. Yet while I fully agree with the need to return the economy to full employment, I’m not entirely convinced that women are suffering disproportionally. On the contrary, although men continue to have a higher employment rate than women, Office for National Statistics data, obtained from the Labour Force Survey, show that women have generally fared better than men in the five years since the start of the recession.

Since the first quarter (q1) of 2008 the number of women in work has increased by more than a quarter of a million (a net rise of 267,000, or +1.2%) while the number of men in work has fallen (a net fall of 70,000, -0.4%). The number of men in employment fell much more sharply than the number of women in employment in the two years to q1 2010 (-600,000 for men, -100,000 for women), increased by more than the number of women in employment in the subsequent two years to q1 2012 (+340,000 for men, +140,000 for women) but increased by less in the year to q12013 (+194 for men, +240,000 for women).

Most strikingly, the number of women aged 50 and over in employment is almost half a million (457,000) higher than at the start of the recession in 2008, the number of men in this age category in employment having increased by a quarter of a million (258,000).  The employment rate of women aged 50-64 has increased by 3.3 percentage points since 2008. Employment rates have fallen for all other working age categories. As for budding entrepreneurs, women account for approaching two-thirds (203,000, or 63%) of the total net increase in self-employment since 2008, the number of women self-employed having increased by almost a fifth (19.3%).

Despite this, it is true that unemployment for women has risen sharply since 2008 and has been above 1 million since 2010. Indeed although the net increase in unemployment has been smaller for women than men since the start of the recession (408,000 compared with 492,000), in percentage terms unemployment has increased by more for women (+60%) than men (+53%). However, the net rise in female unemployment is due to job shortage rather than job loss, with a substantial net increase of 676,000 in the number of women participating in the labour market exceeding the net increase in the number of women in employment. Similarly, there is relatively little difference between the number of economically active and inactive jobless women who want to work (2.45million) and the corresponding number of jobless men (2.36 million). Moreover, the net increase in this so-called ‘want work’ joblessness since the start of the recession is larger for men (513,000, +27.2%) than women (470,000, 23.7).

    

While we need to get more women into jobs and close the gender pay gap – which, incidentally, has continued to narrow in recent years, so it can’t be said that the increase in the number of women in work is due to women becoming relatively cheaper to employ - the reality is that women have generally fared better than men in the labour market since the start of the recession. It’s therefore far from obvious that the problem of workless women deserves greater attention than that of workless men.

Mounting workplace power imbalance harms the economy

Last Thursday (23 May) I had the pleasure of participating in a South West Employment Relations Forum meeting in Bristol, jointly hosted by Acas and the University of the West of England. My contribution was to reflect on the so-called ‘new normal’ for the UK economy and what this might mean for employment relations. But the value of the evening was provided by the assembled managers, trade unionists and academics with first-hand experience of what’s happening in workplaces up and down the land.

The ‘new normal’ has been highlighted by some leading UK economists, notably Andrew Sentance, former member of the Bank of England’s interest rate setting Monetary Policy Committee. However, while it’s easy to agree that the current period of prolonged slow economic growth is in marked contrast to what outgoing Governor of the Bank Sir Mervyn King once described as the ‘nice’ decade from the mid-1990s (i.e. non-inflationary, continued expansion), the underlying nature of our current malaise remains a matter of debate.

If stagnation, high unemployment and falling real wages is purely symptomatic of weak demand, today’s new normal will eventually give way to better times akin to the pre-financial crisis state of affairs. We might have to tough things out, perhaps even suffering a ‘lost decade’ of austerity, but prosperity will be restored. But what if the economy has changed for good – might hard times be with us for the foreseeable future? If so, the ‘new normal’ becomes shorthand for an economic wake-up call, announcing an extended period of at best only limited improvement in living standards and highlighting the need for fairly radical structural reform in order that the good times roll once again.

From the workplace perspective this new normal debate plays out in a contrast between those who reckon the current squeeze on average real earnings reflects the efforts of workers to price themselves into jobs in a weak economy or is instead symptomatic of the emergence of a permanently lower wage/lower productivity economy. For the time being the jury is out on this question, though it is possible to draw a link between structural developments in the labour market and workplaces which in their interaction lead to an unpalatable outcome.

The typical British workplace is now devoid of collective strength. According to the most recent Workplace Employment Relations Survey only 35% of workplaces now have any structure for employment relations – down from 45% a decade ago, driven in particular by growth in smaller private sector workplaces. At the same time, the pool of labour available to employers is growing. The proportion of people long-term unemployed is much lower than in previous recessions, the number of economically inactive people is falling, and work related immigration remains at a historically elevated level.

The underlying power of employed ‘insiders’ to preserve their real standard of pay, let alone push for more, is arguably back to where it was in the early years of the 20^th century. Admittedly, individual workers with particular skills or talent may be able to earn more, while those at the bottom of the pay scale are protected by the national minimum wage. But the average Jack or Jill – the squeezed middle at work - is increasingly impotent when it comes for asking for a pay rise and ever more fearful of what might happen if they do.

Although heightened job insecurity understandably grabbed the headlines last week when the initial findings of the large scale 2012 Skills and Employment Survey were published, what was most shocking was evidence of a longer term increase in the percentage of employees anxious about arbitrary dismissal or victimisation by management. Moreover, there has been a decline in perceived employee influence over wider organisational decision making. In other words, whether one looks at pay or what happens at work, bosses increasingly have the upper hand.

Despite being bad news for workers, this power imbalance might be considered acceptable if it had some clear benefit for the economy. But fear is not a recipe for employee engagement while a slump in real pay is a disincentive to capital investment, which ultimately determines growth in productivity and the potential for higher pay.

In light of this some participants at the South West Employment Relations Forum meeting argued that stronger trade unions offered the best way of restoring power to workers. I’m not so sure, though largely because it’s difficult to see where the political momentum for this would come from. But I am convinced of the need for a much higher profile public debate on this matter. Current discourse is imbued with the false perception that workers have too many employment rights and that this is harmful to productivity, jobs and economic growth. The reality is the complete opposite, an understanding of which ought to be central to discussion of the kind of ‘new normal’ our economy needs.    

Mounting recruitment difficulties?

As a keen watcher of the welter of comment on the employment scene, in recent months I have been particularly intrigued by the number of press releases and media reports signalling an increase in skills or talent shortages leading to mounting recruitment difficulties, and warning of the emergence of a so-called ‘two-speed’ jobs market in the UK.

This strikes me as most odd in an economy with an unemployment rate close to 8% and a slowing nominal rate of growth in average weekly earnings (now down to just 0.8%, and a paltry 0.4% including the effect of bonus payments). A poorly functioning jobs market with lots of structural problems might encounter a serious mismatch between the supply of and demand for skills even when unemployment is still very high, though it’s widely accepted that the UK’s flexible jobs market functions very well. But in any case, if the labour market was suffering a high rate of structural unemployment and experiencing widespread recruitment difficulties this would normally be expected to trigger an increase in wage pressure rather than the ongoing pay slump at present being experienced.

This casts considerable doubt on all the recent hype about recruitment difficulties which has doubtless been due to some employers facing some greater difficulty in hiring staff compared with the depth of the recession in 2008-09, the perception further exacerbated by the surprising jobs boom of 2012 which meant that businesses suddenly became excited about taking more workers on. I have tried in vain to pour cold water on the hype and was therefore encouraged by the sober analysis of the Bank of England’s latest quarterly Inflation Report, published yesterday, which concludes:

“Survey indicators of companies’ recruitment difficulties have risen, and are closer to, but still below, historical averages. The (Bank) Agents’ contacts, however, suggest that difficulties in recruiting suitable staff for available roles are limited to only a few niche sectors, and are rarely a significant constraint on capacity.”

This conclusion is far more in keeping with the broader labour market and macroeconomic indicators, albeit less likely to grab the headlines.

In a sense of course we always have a two speed, or perhaps more appropriately a multi-speed labour market, as evidenced by different unemployment rates for different groups and associated pay relativities. Similarly, there will be times when demand for certain types of occupational skills increases and vice versa. However, there is little to suggest any significant recent change in the structural make-up of the jobs market, whereas there is a lot of evidence that the jobs market as a whole is suffering from a serious shortfall in demand stemming from prolonged weakness in the macro economy.

Moreover, insofar as there are signs of greater two-speed activity in the jobs market this is due not to any generalised increased shortage of supply of skill or talent but instead to an increasing excess supply of less skilled people, driven in part by the government’s welfare to work measures which are pushing more lower productivity individuals into economic activity. No wonder therefore that the CIPD earlier this week were reporting that 45 people are currently competing for every available unskilled job which, as the pay slump further indicates, makes jobseekers reduce their wage demands and workers ever more fearful of asking for a raise in the knowledge that their employer is well aware that so many idle hands are waiting at the door.   

Deeper chill returns to UK jobs market

As I write, the Governor of the Bank of England, Sir Mervyn King, is still taking questions at what is his last Inflation Report press conference. The Bank’s overall message is slightly more optimistic than it has been of late – it reckons the economy will grow a little faster this year than previously forecast, up from 0.9% to 1.0%, while Consumer Price inflation will be a little lower, albeit still well above the rate the Bank targets. However, in his opening remarks at the conference Sir Mervyn also stressed that “this is no time to be complacent – we must press on to ensure a recovery and bring down unemployment”, a further stark reminder of which was given by the latest Office for National Statistics labour market figures, also published this morning. 

The UK jobs market clearly took a turn for the worse in the first quarter of the year. The number of people in work fell by 43,000 and unemployment increased by 15,000 to 2.52 million (7.8%). Men and people on temporary contracts or working as self-employed contractors are being hit hardest by this latest bout of weakness, suggesting that employers are primarily making adjustments to the flexible component of the workforce in the face economic uncertainty. This helps explain the apparent paradox of a corresponding fall in redundancies, the number of which will generally rise only when employers are cutting their core permanent staff.

Young people aged 16-24 have also suffered a fall in employment in the latest quarter (down 46,000) but this has not shown up in higher youth unemployment, which has actually also fallen by 17,000 because a large number of those in full-time education have stopped looking for part-time jobs to supplement their student income.

The English regions have fared particularly poorly in 2013 so far. Most have registered a rise in unemployment in the first quarter, with the notable exception of the North West which managed a sharp fall in unemployment (down 18,000) only because a large number of people responded to an equally sharp contraction in jobs by exiting the labour market. By contrast, Wales and Scotland have enjoyed both decent employment growth and falling unemployment, signalling an end to the ‘Celtic jobs drought’ of 2012.

Ironically for the English regions, while 2012 saw strong employment growth and falling unemployment in a flat lining economy, the slightly better GDP growth registered in the early months of 2013 has thus been accompanied by falling employment and a renewed rise in joblessness. With average weekly earnings now increasing at a paltry rate of just 0.4% – which means a real cut of 2.4% relative to Consumer Price Inflation – 2013 is shaping up to be the ‘hard slog’ year for UK workers I anticipated in my annual forecast last December. Indeed, combining these latest pay and jobs data, the Jobs Economist Labour Market Temperature Index (LMTI) shows that the UK jobs market is now as cold as it was two years ago in the spring of 2011.

The LMTI  is constructed from official data on unemployment, (CPI) price inflation, nominal pay increases and changes in average hours worked per person. A zero reading represents the economy’s potentially attainable combination of unemployment and real pay growth, as obtained from Office for Budget Responsibility estimates.   A reading above zero indicates excess demand for labour, a reading below zero (i.e. the chill factor) indicates deficient demand. An increase in the reading indicates that the labour market is heating up (conditions improving), a decrease in the reading indicates that the labour market is cooling down (conditions deteriorating). 

The labour market was at its coldest at the depth of the recession in February 2009, at which time the LMTI reading fell to minus 13. The reading then increased and broadly stabilized through the remainder of 2009 and 2010 before moving back onto a decreasing trend through to the end of 2011. A combination of strong growth in employment, falling unemployment and moderation in the real pay squeeze saw the LMTI reading rise to minus 5 by autumn 2012. However, since then rising unemployment and a bigger pay squeeze has again lowered the LMTI reading, taking it back to where it was in spring 2011.

The UK labour market has proved remarkably good at creating jobs in the past two years but only because people have been desperate to price themselves into work. As the LMTI shows the prevailing combination of high unemployment and falling real pay indicates a significant ongoing shortfall in demand. People in work and jobseekers alike have now experienced five years of severe labour market chill. And with the somewhat warmer conditions of summer 2012 having given way to a much colder 2013, life in our deep chilled jobs market looks set to continue for some considerable time yet.    

A fond farewell to Fergie

I’ve been away, but got back in time to hear Sir Alex Ferguson bid farewell to the Old Trafford faithful yesterday. It was the first time for a while that football has brought a tear to my eye. No matter what happens to Manchester United from now on, things will never be quite the same again.

Having supported the club since 1965, then an enthusiastic 8 year old, I recall the immediate post-Busby era of decline and relegation. Tommy Doc and Big Ron brought back excitement and hope in the decade to the mid-1980s. But periodic Cup triumphs never translated into the consistency of performance necessary to win League Championships. Fergie not only eventually managed to achieve this but also instilled a belief that success would follow success, regardless of the strength of increasingly powerful opponents. Rarely in the past 20 years has failure in any one season been by a large margin or persistent, with despair soon followed by renewed triumph. Time will tell if this era of resilience is over but I fear that it might be. Manchester United have more than enough financial resource to remain a top four Premier League club for the foreseeable future. But somehow I don’t expect the season climaxing months of April and May to be as adrenaline inducing as they have been throughout the Ferguson era.

I see from the media that quite a lot has been written and said about Sir Alex’s leadership and management qualities, some of it an excuse for the kind of management speak guff that one regularly hears. My view is that if there are wider lessons to be drawn from Fergie’s success they stem not so much from his ability to nurture and orchestrate talented individual players into winning teams but rather from a number of key personal values that underpinned his approach to management. Aside from the obvious need for hard work, the values that time and again crop up whenever Sir Alex is mentioned are those of ambition, honesty and, especially, loyalty.

The thing that has shocked me most in organisational life is the number of people who are satisfied with mediocrity, either because they prefer to drag colleagues down to their own level or because they can’t be bothered to make the effort to excel. Such are the enemies of success. Honesty in the face of such limited ambition or effort is equally important – being honest with oneself and others, even if as in Fergie’s case this means occasional use of the metaphorical hairdryer treatment.

Most important of all is loyalty, both to the cause any organisation sets for itself and to one another within the organisation. Success cannot be built on lack of trust or betrayal of colleagues in order to satisfy some personal ambition or objective. No single individual should think of themselves as being bigger than the team – the disloyalty this breeds is corrosive to all. Hence Sir Alex’s evident disappointment over the years in players prepared to leave Manchester United, be it for money or, even worse, in the belief that they might achieve greater success elsewhere.

Ambition, honesty and loyalty are personal qualities of great men and women. These are not ‘management skills’ that can be acquired, though they can be used to influence the behaviour and performance of us lesser mortals. Sir Alex Ferguson is such a great man. It is that which made him a great football manager and would doubtless have enabled him to succeed in another walk of life had the rebuilding of Manchester United not been his ‘impossible dream’.                 

A sombre reality check for the UK jobs market

Baroness Thatcher’s funeral meant that fewer eyes than usual were directed at this month’s official labour market statistics. Sadly, they haven’t done anything to lift the funereal mood.

After a period of remarkably strong job growth 2013 was always likely to be a tougher year for the UK labour market, and today’s triple whammy of bad news delivers the inevitable reality check. Job growth has stalled, the number of people in work having fallen slightly by 2,000 in the December-February quarter compared to the previous quarter. Unemployment on the headline survey measure has risen sharply (by 70,000, though the number of people on Jobseeker’s Allowance fell by 7,000 in March). Meanwhile, people in work are not only suffering a real wage squeeze but also seeing barely any improvement in the cash value of their earnings. The rate of growth in total pay has fallen from 1.2% to 0.8% (from 1.3% to 1% for regular pay i.e. excluding bonuses) compared with Consumer Price Inflation at 2.8%. We haven’t seen such weak nominal pay growth in more than a decade of comparable data.

This rash of bad news doesn’t necessarily mean we are facing a further ongoing surge in joblessness. While the unemployment rate has increased to 7.9% most forecasters expect a peak of around 8.2% later this year.  But what looks like the end of the jobs boom does demonstrate that simply relying on people to price themselves into work cannot guarantee continued employment growth in an economy still experiencing a serious lack of demand.

The net fall in employment is due mainly to fewer unpaid family workers and those employed on government schemes. By contrast the number of employees grew by 22,000. Moreover, the rise in unemployment is driven by an increase of 68,000 in the size of the total workforce. Even so what’s clear from the latest figures is that sectors dependent on discretionary consumer spending or public subsidy – notably hospitality, the arts and entertainment – are beginning to shed jobs, while the impact of public sector downsizing has cut the number of admin and support jobs and jobs in education.  In a reverse of the pattern seen in 2012, it also looks as though the jobs market has taken a particular turn for the worse in England, with London experiencing a marked reverse following the Olympic jobs boost. Scotland and Wales saw falls in unemployment.

Overall, today’s figures are in line with what I expected at the turn of the year. They are bad, especially relative to the surprisingly good news of last year, but maybe economic policy debate will benefit from this dose of sombre reality.   

What's been happening to public sector jobs?

The surprising strength of private sector jobs growth has deflected attention away from what’s been happening to public sectors jobs, so here is a brief recap. A fuller account with tables is available at www.thejobseconomist.org

At the end of 2012 5.72 million people were employed in the UK public sector, comprising 5.24 million in ‘general government’ (i.e. central and local government) and 0.48 million in public corporations. This total is 640,000 lower than the peak in q3 2009 and 600,000 lower than q1 2010, the final full quarter before the Coalition Government was formed.

Part of the total fall in public sector employment is due to a statistical reclassification of people employed in English Further Education (FE) Colleges and Sixth Form Colleges from the public to the private sectors. Adjusting for this the underlying reduction in public sector employment between q1 2010 and q4 2012 is 410,000 (6.5%). This is a better indicator of the net impact of public sector job cuts on the overall labour market.

The Office for Budget Responsibility (OBR) projections for public sector jobs relate only to general government employment. Adjusting for statistical reclassification there was an underlying fall in general government employment of 340,000 (-5.9%) between q1 2010 and q4 2012, slightly less than half the total  underlying fall of 700,000 (-12.1%) the OBR projection implies for q1 2010 to q1 2015. Given the current quarterly rate of decline in general government employment the OBR projection points to a further total reduction of 340,000 between q1 2013 and q1 2015.

If the OBR projection proves correct the total fall in general government employment of 700,000 between 2010 and 2015 will match the rise in general government employment from its previous trough in q2 1999 to the previous peak in q4 2009. Consequently the Coalition will in five years cut as many general government jobs as the former Labour Government created in the decade to the end of 2009.

As a point of comparison, during the most recent previous period of UK public sector downsizing in the 1990s, general government employment fell by a total of 590,000 (10.8%) with an average reduction of 75,000 per year. The annual average projected fall in general government employment between 2010 and 2015 is 140,000. On the current OBR projection the Coalition Government is therefore cutting general government employment at almost double the annual amount achieved in the 1990s.

The projected average reduction in general government of almost 43,000 per quarter between now and the General Election due in 2015 is considerably higher than the average reduction of 30,000 per quarter since the 2010 General Election.  However, although this points to a quickening in the pace of public sector downsizing, the actual underlying reduction in general government employment has slowed to around 20,000 per quarter since mid-2012.

If the OBR is right, almost half the pain of public sector jobs cuts expected in the current five year Parliament is still to be felt.  This will almost certainly further exacerbate tension between the government and public sector trade unions at a time when talk of a general strike is in the air. But an important caveat should be applied here.  

As I have continually pointed out over the past couple of years, the OBR methodology for projecting public sector employment takes no account of what’s happening on the ground in public sector workplaces. This raises the possibility that the OBR, which in 2010 greatly underestimated the scale of public sector job cuts in 2011 and 2012, may now be overestimating the scale of future cuts. If the current actual quarterly rate of reduction were to persist, the fall in general government employment between now and 2015 would be 160,000, limiting the total fall between 2010 and 2015 to 520,000. If so, the worst of the public sector job cuts in this Parliament are already behind us.  

Jobs and HRM in the Thatcher years

Last year I prepared a historical timeline looking at trends in work, human resource management and the related political context during the past century. In the light of yesterday's news of the death of Baroness Thatcher, here is my brief account of what happened during the Thatcher era.

Margaret Thatcher entered Downing Street in 1979 as Britain’s first woman prime minister. The Thatcher government broke the post-war political consensus by prioritising low and stable inflation, achieved by controlling the supply of money, rather than full employment as the principal objective of macroeconomic policy. Raising economic growth and cutting unemployment were instead the target of structural or supply side policies, such as de-regulating markets, privatising state run enterprises, switching more of the burden of taxation from incomes to VAT, abolition of the Wages Councils, and curbing the power of trade unions to affect pay bargaining or prevent managers from changing work practices.

The initial combination of tight monetary policy, tight fiscal policy and economic restructuring was a major recession, lasting from 1979 to 1981 and soaring unemployment. Unemployment rose above 3 million (close to 12%), higher than at any time since the 1930s Depression, and remained at around that level until 1986. Manufacturing bore the brunt of job losses, partly because tight monetary policy caused the value of the pound to rise which priced UK goods out of global markets, and partly because the recession coincided with greater use of advanced robot technology and increased competition from emerging economies. Society became imbued with a strong sense of economic insecurity and it was commonly said that people could ‘no longer expect a job for life.’

The efforts of unions to counter the impact of global competition and technology on jobs clashed with the Thatcher government’s aim to fully embrace market forces by weakening union resistance. That resistance was broken most visibly and violently in the Miners’ Strike of 1984-85 and the Wapping newspaper dispute of 1986. Broader social unrest was in turn witnessed in a series of inner city riots, often involving conflict between the police and disadvantaged ethnic minority communities. Trade union membership, which had peaked at around 12.2 million in 1980, entered what was to prove the start of a period of continual long run decline (the number falling to less than 6 million by 2011).

As in the 1930s, the 1980s witnessed a widening north-south divide. Recession, increased competition and technology hit manufacturing and heavy industries, concentrated in the north of Britain particularly hard. By contrast economic recovery, boosted by reductions in interest rates, a boom in house prices and a surge in spending on consumer services, favoured the south. The growing economic power of London and the south east plus the shift from an manufacturing to finance based economy was symbolised by The Big Bang financial deregulation of 1986 and fictionalised by Harry Enfield’s comedy creation Loadsamoney, an employed brash southerner who delighted in flashing his wad of banknotes at poor, jobless, northerners.

Once the economic recovery gathered pace more generally, resulting in a sharp fall in unemployment from 1986 onward, personnel managers in the private sector schooled in the strife ridden post-war era of collective industrial relations and pay bargaining, made full use of the structural and legislative changes taking place.

There was a clear strategic decision to depart from traditional collective procedures and instead focus on employees as individuals. British managers also started to adopt the new US fashion for calling personnel management Human Resources management (HR or HRM). This combined the concept of treating employees as a resource with investment potential with that of treating employees as people who needed to be nurtured and motivated. More and more HR professionals started to specialise, focusing on specific roles in training, reward or diversity. The development of the European Community plus the emergence of multi-national corporations operating in different countries in turn set in train a shift toward what would later be labelled ‘global HR.’ 

HR managers led HR departments and started to introduce individual performance appraisal, individual performance-related pay conditioned by market forces rather than national or sectoral collective agreements, and direct communications between front-line managers and their employees. Organisations also started to be influenced by the management practices of overseas businesses, especially in the car industry, that started to invest in the UK. Increased attention was paid to the quality movement inspired by management writers like William Edwards Deming whose 1982 study Out of the crisis drew on his post-war experience of Japanese management practice. Concepts like lean production and just-in-time systems entered the management lexicon.

British employers and HR gurus started to talk in terms of ‘flexible firms’ comprising a core of workers on permanent contracts working alongside armies of temporary staff and self-employed contractors. Charles Handy published his study on The Future of Work in 1984, forecasting that fewer people would have a single employer but instead be ‘portfolio workers’ performing jobs for a number of different employers. The shift of employment from manufacturing to services also shifted the gender and hours balance of the workplace, with women taking advantage of the greater opportunity to work part-time and workers in general more likely to be employed to work flexible hours rather than on a traditional ‘9 to 5’ basis. Labour market flexibility in turn helped price more low skilled people into jobs, eventually enabling the UK to achieve a lower rate of structural unemployment than seen in the still strongly regulated economies of continental Europe, albeit at the cost of a return to early 20th century style wage inequality.

Government and employers claimed that greater labour market flexibility explained why unemployment started to fall rapidly from 1986 onward once strong demand returned to the economy, though part of this improvement was due to shifting some people receiving unemployment benefits onto incapacity benefits which disguised the true extent of joblessness and welfare dependency. Unfortunately, however, as the decade drew to an end, economic recovery once again turned into an unsustainable inflationary boom (nicknamed the Lawson boom after the then Chancellor of the Exchequer Nigel Lawson). And as usual a bust was soon to follow.  Unemployment began to rise again and was soon on its way back to 3 million.

Without an incomes policy to combat rising prices the Thatcher government instead in 1990 decided to fix the value of the pound and set interest rates at a relatively high level within the constraints of the European Exchange Rate mechanism (ERM). The result was a depression of demand which resulted in recession. Alongside political turmoil caused by the government’s plan to replace the household rates system of local taxation with a poll tax, this marked the end of Mrs Thatcher’s 11 and a half year premiership.