Wednesday 13 December 2017

Falling UK employment - a labour supply story

The latest official UK jobs figures (for August to October 2017) show a quarterly fall of 56,000 in the number of people in work (lowering the employment rate from 75.3% to 75.1%), a small fall in the number unemployed - leaving the unemployment rate steady at 4.3% - and a very slight pick-up in nominal pay growth (i.e. average weekly earnings excluding bonuses) to 2.3%, with real pay once again fallen by 0.4% once adjusting for consumer price inflation.

However, although the figures suggest the jobs boom of recent years has come to end this is due to emerging weakness in the supply of employable people to the labour market rather than a fall in demand from employers. 

Redundancies are still on the decline (down 11,000 on the quarter) and unfilled vacancies have risen to yet another record high of 798,000; but the rapid growth in labour supply of recent years has seemingly gone into the reverse. The total labour supply as measured by the economically active population aged 16 and over fell by 82,000 in the quarter. The main reasons for this are a sudden surge in economically inactive student numbers (up 35,000, 1.5% on the quarter ) and a fall in the number of citizens of the central and eastern European countries (the A8) that joined the EU in 2004 (the number of people born in these countries fell by 35,000, -3.2%, in the year to the third quarter). 

In principle, this drop in available labour should be good news for unemployed jobseekers. The steady unemployment rate may therefore indicate a lack of employability on the part of the remaining pool of unemployed. Assuming no overall weakening of demand for workers, or renewed growth in supply, the labour market is thus likely to show greater signs of tightening in the coming months which, fingers crossed, should mean somewhat better news on the pay front.

Wednesday 15 November 2017

Much better news on UK labour productivity offers hope for better pay prospects in 2018

The latest official jobs and productivity figures, published earlier this morning by the Office for National Statistics, suggest that UK employers are finally having to respond to much tighter labour market conditions as the economy edges closer to full employment. 

Although the economy continued to grow, there was no net hiring in the third quarter of the year (total employment fell marginally, by 14,000), with businesses cutting full-time jobs and switching to increased use of part-time workers. The combination of an overall fall in total hours worked (down 0.5%) and continued growth in output saw a very welcome quarterly surge in output per hour of 0.9% - the fastest rate of growth in labour productivity for six years. For the time being there is still no sign of a corresponding improvement in pay, with growth in average weekly earnings steady at 2.2% and real earnings still falling against a backdrop of high consumer price inflation. However, the likelihood of sustained improvement in productivity as employers continue to adjust to tighter labour market conditions offers hope of better pay prospects in the coming years albeit we are unlikely to enjoy job growth at the rapid pace seen since 2012.

Wednesday 18 October 2017

Women drive latest rise in UK employment as pay growth disappoints yet again

The UK jobs boom continues according to the latest Office for National Statistics figures - mostly covering the three months to August 2017 - published earlier this morning  

Job growth in the latest quarter is driven mostly by women who account for more than 8 in 10 of the total net increase in employment of 94,000 (taking the overall employment rate to 75.1%) . Almost all these additional women in work are in part-time jobs, split fairly evenly between part-time female employees (up 42,000) and part-time female self-employed (up 45,000). Men by contrast have seen a rise of 29,000 in the number working full-time offset by a fall of 13,000 working part-time. However, although this overall degree and make-up of employment growth is good for the unemployment figures – with the unemployment rate again at a 42-year low of 4.3% – it is failing to exert leverage on growth in average weekly earnings (excluding bonuses) in either cash terms (running at an annual growth rate of 2.1%) or real terms (down 0.4% on the year). While the headline jobless and price inflation rates imply the economy needs a small interest rate rise, the pay growth figures say ‘not quite yet’.

Wednesday 13 September 2017

Mirror image of recent job gains and losses could signal future pattern for UK labour market

The UK Office for National Statistics has just published its monthly labour market report, mostly covering the three months to July 2017

The latest figures once again show a healthy rise in employment (up 181,000 in the most recent quarter, to a rate of 75.3%), a further fall of 75,000 in the number of people unemployed (down to a rate of 4.3%) and 107,000 fewer economically inactive (down to 21.2%), yet still no sign of any sustained upward momentum in the cash value of average weekly earnings resulting in a 0.4% fall in real wages. This remains a jobs boom without a feel-good factor.

Although the real wage squeeze caused by the inflationary impact of the fall in the value of the pound is the most obvious symptom of Brexit uncertainty on the labour market, there are signs of a Brexit effect in the recent pattern of job gains and losses. The more competitive exchange rate has given a boost to manufacturing jobs, up 34,000 in the second quarter, but there are signs of weakness in the real estate sector where the number of jobs fell by 34,000. The consequences of the real wage squeeze for consumer spending may also be putting pressure on the arts, entertainment and recreation sector, which shed 30,000 jobs in the quarter. This kind of mirror image effect could be an early pointer to a post-Brexit future of winners and losers in the UK job market.   

Wednesday 16 August 2017

Latest official UK Jobs Report tells a good news-bad news story on EU migration and Brexit

For regular readers of the UK Office for National Statistics (ONS) monthly release of official labour market statistics, the latest 'Jobs Report' published earlier this morning will have a distinctly familiar feel. 

Another record number and proportion of people in work (up 125,000 in the latest quarter to 32.07 million or 75.1%), the unemployment rate down to a 42 year low of 4.4%, combined with anemic average regular weekly nominal wage growth at 2.1% and falling real wages, down 0.5%. The unemployment rate continues to scream tight labour market and near full employment, but pay points to continued slack and poor productivity growth (output per hour worked having fallen by a further 0.1% according to the ONS’ latest flash estimate). The UK jobs market is thus performing very well but still far from ‘strong’ in a meaningful sense of the word.

In terms of detail, the continued rise in the employment rate of EU nationals working in the UK to 80.8% over the past year is a good news-bad news story. On the one hand, although the inflow of EU migrants has slowed considerably compared with recent years, it indicates that the Brexit vote has not overall deterred migrants from entering the UK to fill job vacancies. But on the other hand it further highlights the dependence of many UK employers on the free movement of EU labour and thus the possible negative consequences of a hard Brexit deal.

Finally, while the annual fall of 20,000 to 883,000 in the number of people on a zero-hours contract in their main jobs leaves the proportion of zero-hours contract workers in total employment unchanged at 2.8%, it now looks as though the proportion peaked last year at 2.9%. It is unclear, however, if this reflects a change in the underlying economic conditions faced by employers or a response to popular pressure on firms to offer staff greater security over hours and incomes.      

Wednesday 12 July 2017

UK workers experiencing Brexit uncertainty in the shops rather than the jobs market

It's official UK Jobs Report day again, this month's data release from the Office for National Statistics mostly covering the period March to May 2017 

The UK jobs market continues to outperform the wider economy with employment rising (up 175,000 to a record high rate of 74.9%) and unemployment falling (down 64,000 to a 42 year low rate of 4.5%) in the latest quarter, defying the background of slower GDP growth. May also saw a welcome pick-up in average regular weekly pay growth from 1.8% to 2.%.  But what a buoyant labour market giveth, much higher price inflation has more than taketh away, with average real weekly wages falling by 0.5%. 

For the time being therefore any negative effect of Brexit uncertainty on the UK workforce is coming indirectly via the higher prices people are facing in the shops rather than directly in terms of a dampening impact on job opportunities or pay packets. However, the longer the real wage squeeze continues the greater the risk that weaker demand for goods and services will feed through to weaker demand for labour and lead to lower business investment, thereby further reducing the prospect of a productivity led boost to real incomes.      

Wednesday 14 June 2017

UK pay squeeze starting to feel more like a bite

We knew the UK was entering another prolonged period of falling real wages but the latest official Jobs Report from the Office for National Statistics suggests the squeeze is starting to feel more like a bite. The growth rate of average weekly earnings excluding bonuses slowed to just 1.7% in cash terms in April and fell by 0.6% when adjusted for the corresponding rate of consumer price inflation. The nominal and real figures including bonuses were 2.1% and -0.4% respectively.

What’s remarkable is that pay growth, however measured, is so weak at a time when employment is at joint record rate of 74.8%, unemployment at a 42 year low of 4.6%, and the working age inactivity rate down to 26.5%. 

Moreover the rise in employment in the latest quarter is driven almost entirely by relatively strong growth in full-time jobs for employees on permanent contracts. This, on the face of things, doesn't look like a surge in the so-called gig economy. The total rise of 109,000 in the number of people in work in the three months to April comprised a rise of 196,000 employees working full-time, a fall of 69,000 employees working part-time, a fall of 24,000 full-time self-employed and a rise of 26,000 part-time self-employed. The number of temporary employees fell by 17,000 and the number of part-time workers unable to find a full time job fell by 39,000. All the net employment growth in the first quarter was in the private sector.

However, despite the overall very positive news on jobs the weak and weakening pay figures are the key take-away from today's ONS report. Hard times for people in work and near full employment make strange bedfellows, highlighting the extent to which a de-regulated labour market with an abundance of workers available to fill low wage vacancies has altered the UK jobs landscape.        

Wednesday 17 May 2017

Underlying pay growth slows and average real weekly earnings fall as productivity takes a hit despite 42 year low in UK unemployment rate

The UK Office for National Statistics (ONS) has just released its latest monthly jobs report, including data mostly covering the three months to March 2017. This is the last set of official labour market figures to be published before the General Election scheduled  for 8 June.    

Employment is up again by 122,000 (all full time jobs, mostly for employees) to a new record rate of 74.8% while unemployment is down 53,000 to a 42 year low of 4.6%, with job vacancies also at a record level. Yet with labour productivity estimated to have fallen by 0.5% in the first quarter of the year the underlying rate of growth in average weekly earnings (i.e excluding bonuses) has dipped to 2.1%, a real terms fall of 0.2% when adjusted for the corresponding rate of consumer price inflation. 

This is a jobs market that looks better on paper than it feels in the pocket, reflecting a structural shift in the types of work people do and the relative bargaining power between workers and bosses. No wonder workers’ rights, productivity and pay rather than the availability of jobs per se, is a key battleground in the UK General Election campaign.         

Wednesday 12 April 2017

How low can the UK jobless rate safely go?

According to the latest official data (mostly covering the three months to February 2017) just released by the Office for National Statistics, the UK labour market continues to enjoy a robust sustainable expansion.  

There were 39,000 more people in work (mostly full-time) in the latest quarter plus a record number of job vacancies (767,000), 45,000 fewer unemployed and 10,000 fewer economically inactive alongside an easing in pay pressure. 

A joint record employment rate of 74.6%, an unemployment rate at a 42-year low of 4.7% and almost zero (0.1%) growth in real average weekly earnings illustrates a remarkable structural change in the operation of the UK labour market compared with earlier decades. 

This particular combination of jobs and pay suggests that the unemployment rate could fall much further, perhaps below 4%, without triggering troublesome pay inflation. While the effect of Brexit uncertainty on the demand side of the economy might yet result in a temporary rise in unemployment later this year, full employment is thus now a more realistic prospect for the UK than at any time since the early 1970s.’        

Wednesday 15 February 2017

UK jobs market stablises but no sign yet that Brexit means EU worker exit

It's UK jobs report day once again. This month's labour market data release from the Office for National Statistics (ONS) mostly covers the three months to December (i.e. Q4) 2016 

The UK labour market stabilized in the final quarter with little overall activity on the jobs front combined with slightly weaker growth in productivity and pay. 

The total number of people in work increased by 37,000 to 31.837 million (yet another record employment rate of 74.6%). But there was no increase in the number of employees - the smallish rise in employment consists of more self-employed people (up 13,000), more unpaid family workers (up 4,000) and more people on government supported schemes (up 21,000). The level of job vacancies meanwhile was broadly flat (at around 750,000) while the unemployment rate held steady at 4.8%. 

The ONS commentary suggests the labour market is now edging toward full capacity. But if by this they mean the market is now quite tight this still isn't showing up in the pay figures. Growth in output per hour worked (aka labour productivity) dipped to 0.3%, down from 0.4% in the third quarter, and together with stable unemployment this led to a slight fall in the rate of growth of average weekly earnings to 2.6%. With consumer price inflation picking-up, UK workers are thus beginning to face another bout of downward pressure on real pay, which may depress overall economic growth in the course of 2017.   

However, there is little sign that the labour market is yet being affected by an exodus of EU born workers following the EU referendum result. Given seasonal factors the number of EU born people working in the UK was more or less flat at around 2.3 million in the second half of last year, and in the final quarter of 2016 was 188,000 higher than in the corresponding quarter of 2015. While this may suggest the UK is no longer the draw it once was for EU migrants, Brexit has yet to trigger a big EU labour exit.’ 

Wednesday 18 January 2017

Precarious workforce bears the brunt of UK jobs slowdown

It's possible that you might read positive things about the latest Jobs Report from the UK's Office for National Statistics, mostly covering the three months September to November 2016, which was published earlier today. If so, here is a cautionary note: 

The UK labour market showed clear signs of a modest slowdown toward the end of 2016 with the precarious workforce of temps, part-time employees and full-time self-employed bearing the brunt as businesses responded to economic uncertainty following the Brexit vote. The total number of people in work fell by 9,000 in the three months to November but this includes much bigger falls in the number of full-time self-employed (down 49,000), part-time employees (down 60,000) and temps (down 35,000). Although part-time self-employment increased (up 31,000) this is likely to be due to more under-employment among the self-employed unable to find enough hours of work. Only a sharp rise of 143,000 in the number of economically inactive people prevents the weaker jobs numbers from showing up as higher unemployment, the number of jobless people actively seeking work in fact falling by 52,000. Don’t be fooled, therefore, by apparently good headline news of falling unemployment and higher nominal wage growth (up to 2.7% excluding bonuses), the jobs market is at present slowing not growing, as those in precarious work know only too well.