Wednesday 18 December 2013

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.

Thursday 12 December 2013

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.

Thursday 5 December 2013

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.