The Office for
National Statistics (ONS) has released the latest set of UK labour market data,
mostly covering the three months December 2013 to February 2014.
All eyes today are
on the latest average weekly earnings figures which show that the UK’s prolonged
real pay squeeze is over, with average total nominal pay growth of 1.7% in
February 2014 matching that month’s CPI inflation rate. Bonus pay accounts for
the end of the squeeze – regular pay rises are still running at a sub-inflation
rate of 1.4% – although workers in the private sector on average enjoyed a small
real wage increase in February whether one looks at nominal growth in pay
including bonus payments (which increased by 2%) or excluding bonus payments (which
increased by 1.8%). Either way, with pay set to keep rising against a backdrop
of modest price inflation, which the ONS told us yesterday fell to 1.6% on the
CPI measure in March, average real weekly
earnings are now on the up again for the first time since 2010 even though
still well below the pre-recession level.
However, while the
pay figures grab our attention one should not overlook how truly remarkable the
latest jobs figures are. Not only is employment up by 239,000 in the latest
quarter on the Labour Force Survey (LFS) measure, helping to cut the
unemployment rate to 6.9% (2.24 million), but the ONS’s quarterly Workforce
Jobs (WJ) survey data show that the UK economy added almost a million (993,000)
net new jobs in 2013 as a whole, almost half a million in the final quarter
alone.
Note that the LFS
is a household survey, which provides us with an estimate of the number of
people in employment, while the WJ is mainly a survey of employers asking them
how many jobs they provide. The LFS estimates that there are 30.3 million
people in employment, the WJ that there are 32.7 million jobs (the estimates
differ primarily because of differences in coverage and methodology but in part
also because some people in employment do more than one job). Both measures
tend to move in line over time, although they sometimes suggest different rates
of employment growth. The ONS prefers to use the LFS to provide its headline
employment measure – the LFS providing more timely estimates and forming part
of an overall framework of labour market statistics which also provides
estimates of unemployment and economic inactivity – but prefers the WJ to
estimate the distribution of jobs across industrial sectors because respondents
to the LFS might not always be fully aware of which sector they work in.
Either way the latest
WJ figures indicate annual UK job growth of 3.1% in the year to the final
quarter of 2013, making the latter one of the best years for UK jobs in decades,
the kind of performance one might expect during an economic boom rather than a
gradual economic recovery. While it’s clear that many of these net new jobs are
linked to the recovery in the housing market – construction added 92,000 jobs
in 2013 (an increase of 4.5%), real estate activity 83,000 (an increase of
16.3%) – jobs are being added across the economy, including in manufacturing
which added 45,000 jobs (an increase on 1.8%). Moreover, according to the WJ well
over two-thirds (707,000) of these net new jobs are for employees, so the ‘jobs
boom’ can’t be explained solely by the big surge in self-employment recorded by
the LFS in recent years.
Given all this,
along with good news of rising job vacancies (up by more than 100,000 in the
year to the first quarter of 2014), falling youth unemployment (down 38,000 in
the latest quarter), fewer people claiming Jobseeker’s Allowance (down 30,400
in March) and fewer part-timers unable to find a full-time job (still high at
1.42 million but down 17,000 in the latest quarter), it’s clear that the UK labour
market is now in a far healthier state than 12 months ago. What remains to be
seen now is what happens to this remarkably strong jobs growth as real pay
growth increases and employers set their sights on increasing productivity to
counter rising labour costs. Watch this space.
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