Wednesday 18 September 2013

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.

Monday 16 September 2013

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. 

Wednesday 11 September 2013

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.