As I write it’s just a little over an hour until the
Chancellor, George Osborne, delivers his fourth budget statement to Parliament.
He might have chosen a better day. For months now each set of official labour
market figures from the Office for National Statistics (ONS) have shown falling
unemployment. This morning, however, the news was less good – unemployment up
by 7,000 in the three months to January.
The latest headline rise in unemployment is
disappointing though primarily due to a flood of women into the labour market
at the turn of the year rather than weak employment growth (see headline
figures below). On the contrary, the number of people in work again rose
sharply, with a big rise in full-time employees more than offsetting a fall in
part-time employment and self-employment. Private sector job creation continues
to rise at a remarkable pace, while the loss of public sector jobs has slowed
from around 30,000 a quarter to 20,000 a quarter. Overall, job vacancies are up
very slightly, redundancies down and encouragingly long-term unemployment down.
However, it’s clear that people are experiencing real pay cuts to price
themselves into work, the rate of growth in weekly earnings slowing yet again
from 1.3% to 1.2% at a time when price inflation is on the rise.
The big worry in these latest figures is what appears
to be a more fundamental renewed deterioration in youth unemployment.
Employment has fallen for 16-24 year olds while unemployment has risen sharply,
with the core group of young people not in full-time education, who had a
relatively good 2012, now being hit hard once again despite a significant
amount of government support being targeted at them.
But we should be careful
not to go overboard on the doom and gloom. With the UK economy at risk of a
triple dip recession, almost 7,000 public sector jobs being shed each month and
2.52 million people unemployed it might seem odd to suggest that we’ve just
been through a jobs boom. Yet believe it or not 2012 was the best year for employment growth since
2000 and surpassed by only nine other years in the previous four decades. What
makes the 2012 jobs boom truly extraordinary is that all the other jobs booms
since the 1970s occurred during periods of economic boom, with GDP growing well
above the underlying trend rate, rather than stagnation.
The 2012 jobs boom can’t be explained solely
by more people working short-hours. Full-time employees account for half the
total increase in employment. Only
in two years since the early 1970s has the volume of work undertaken in the UK
economy as measured by total weekly hours worked increased at a faster annual
rate than in 2012.
A jobs boom without economic growth is unprecedented
in recent UK economic history. The downside of course is a fall in labour
productivity and a continued real pay squeeze. This might justifiably be deemed
a price worth paying for more jobs. But a jobs boom that doesn’t deliver
improved living standards is like nothing we’ve seen before in the UK and not
necessarily a signal that the economy is heading in the right direction.
The extraordinary jobs boom may console the Chancellor but doesn’t lessen the
onus on him to deliver a Budget for growth later today.
Latest Quarterly (November-January) Labour market headlines
from ONS stats
Number of people
in work up 131,000 (of which 111,000 women)
Number unemployed
up 7,000
Number of people
in labour market up 137,000 (of which 116,000 women)
Number unemployed
and claiming Jobseekers Allowance down 1,500
Number 16-24s in
work down 30,000
Number 16-24s
unemployed up 48,000
Number long-term
unemployed down 16,000
Private sector
employment up 151,000
Public sector
employment down 20,000 (mostly due to education)
Full-time
employment up 195,000
Part-time
employment down 64,000
Part-time who want
full time job down 6,000
Employees up
170,000
Self-Employment
down 21,000
Temp employees up
18,000
Temp employees who
want permanent job up 8,000
Vacancies up 2,000
Redundancies down
14,000
Regions: unemployment
up in North East, North West, Yorks and
Humber, West
Midlands, South East, Wales and Northern Ireland
Growth in total
pay (including bonuses) down from 1.3% to 1.2%
Growth in regular
pay down from 1.3% to 1.2%
Apart from declining productivity might the following be another reason for the jobs market defying gravity:
ReplyDeleteWe're still borrowing a huge amount as a country and a good deal of that public spending actually goes into the private sector. I wonder how many private sector jobs are dependent on govenmentt spending? (probably around a third if public spending is 45% of GDP??). You could argue that it's George Osborne's failure to get the deficit down that is the reason he can celebrate lower unemployment. (Wish I could tweet that to Ed Balls before he stands up!)
Also, taking out declining North Sea oil output and the decline in financial services since 2008, is the rest of the economy actually doing significantly better than the official growth figures suggest?
ReplyDelete