Winners and losers in the 2011-12 jobs market

I’m slightly hesitant about naming anyone in my blog at the moment. Within days of mentioning Clive Dunn, the Dad’s Army actor died at the age of 91. Last week’s Dallas themed post was equally swiftly followed by the death of 81 year old Larry Hagman. The latter was most famous for playing the character JR Ewing, whose fictional close encounter with death a generation ago meant that “Who Shot JR?” for a short while usurped “Who Killed JFK?” as the question most associated with the Texan city. It was therefore somehow fitting that Mr Hagman passed away on November 23^rd, just one day after the 49^th anniversary of the assassination of the former United States president.

Back here at home 22 November saw the Office for National Statistics (ONS) release the latest Annual Survey of Hours and Earnings (ASHE). The results confirm the extent of the real pay squeeze between spring 2011 and 2012, with hourly median pay growth for full-time employees only around half the corresponding 3% rise in price inflation as measured by the Consumer Prices Index. But with the national minimum wage helping to support pay in the lower half of the earnings league, the top 10% of earners felt the biggest squeeze. The pay of full-time employees in the bottom tenth of the distribution increased by 2.3%, while pay for those in the top tenth fell by 0.2% (i.e. a real hourly pay cut of 3.2%).

My initial response to this was that although the pay gap between top, middle and low earners remains very wide in the UK and is still far wider than a generation ago, 2011-12 has as least turned out to be something of a ‘we’re all in it together’ year in Britain’s jobs market with pay at the top hit hardest by the double dip recession. However, I was also interested to see how pay growth between spring 2011 and 2012 compared with employment growth during roughly the same period (April-June in each year), as discussed in my blog posting of 12 November which listed the top 10 fastest growing occupations in the past year and the 10 occupations recording the biggest loss of employment.

Growing demand for certain types of labour might result in a combination of relatively strong growth in both employment and pay, or vice versa where demand is weak. But it’s also possible that faster or slower pay growth could help price some types of workers out of or into jobs, thereby causing pay and employment growth to diverge.   

Although the ASHE lists the number of jobs in each occupation as well as pay and hours these are considered indicative rather than accurate estimates, so it’s best to compare the ASHE results with the broadly corresponding Labour Force Survey employment estimates.

Listed according to their position in the Standard Occupational Classification (SOC) the 10 fastest growing occupations saw the following percentage change in median hourly earnings for full-time employees: Production Managers and Directors in Manufacturing (+1.1%), Human Resource Managers and Directors (+2.2%), Information Technology Specialist Managers (-0.5%),  Management Consultants and Business Analysts (-0.3%), Quality Assurance and Regulatory Professionals (-2.8%), Graphic Designers (+1.0%), Financial Accounts Managers (+0.7%), Credit Controllers (+0.5%), Chefs (+0.5%) and Sales and Retail Assistants (+1.9%).

The corresponding changes for the 10 occupations registering the biggest jobs losses are: Financial Managers and Directors (+0.2%), Chartered and Certified Accountants (+5.5%), Youth and Community Workers (-2.8%), Local Government Administrative Occupations (+0.8%), Typists and Related Keyboard Occupations (+1.8%),  Electricians and Electrical Fitters (+0.1%), Plumbers and Heating and Ventilating Engineers (-0.5%), Teaching Assistants (+2.5%), Nursing Auxiliaries (+1.4%), Security Guards and Related Occupations (+0.8).

Interestingly the only one of these 20 occupations to register a real hourly pay increase, Chartered and Certified Accountants, was one of the biggest job shedders (down 39,000 or 16.8% on the year), suggesting that this group was content to trade-off higher pay against jobs. The biggest losers are Youth and Community Workers, who suffered a 5.8% real hourly pay cut as well as shedding 25,000 jobs, a 30% reduction in numbers. Of the remainder, Human Resource Managers and Directors is the occupation that fares best (a modest hourly pay cut of 0.8%, alongside employment growth of 22,000, or 19.2%), indicating relatively strong demand for this group. Ironically, therefore, HR managers and directors, who are employed to deliver news about pay and job cuts to others in the workplace, have of late been keeping the best news for themselves.  

HR - more big hats, cattle no more engaged or productive

Talk about finding sixpence and losing a shilling. Just as I rejoiced at no longer having to watch archive footage of Jim’ll fix it!, while channel hopping I discover that an updated version of Dallas is on TV. Little has changed. Once again JR Ewing is dismissing a rival as being ‘big hat, no cattle’, talking a lot but lacking money, power and influence. This reminded me that the same phrase has often been used to deride the HR profession, so I decided to take a quick look at what’s been happening to the size of HR hats and what effect this might be having on the ‘cattle’ they're responsible for.

On the conventional Labour Force Survey measure just over 0.4 million people are currently (Q2 2012) employed in HR and development roles in the UK. This narrow figure encompasses HR directors, managers, trainers, and administrators. The figure doubles to around 0.8 million if payroll and wage clerks are added but people doing these jobs are often considered finance rather than HR staff.

The narrow HR total is 83,000 higher than in 2001. The number surged by almost 100,000 to a total of 450,000 in the boom years to 2008 before falling in the 2008-9 recession, settling at 432,000 in 2010. But the number has since recovered to 437,000 despite the 2011-12 recession and widespread back office job cuts in the public sector. Although occupational classifications changed in 2011 the effect of this on HR was simply to reclassify some HR director roles to HR managerial roles and to separate HR administrators into a specific occupational sub-category. This led to a sudden statistical drop of 28,000 between 2010 and 2011 in the number of senior HR staff and a corresponding jump in HR managers and administrators. However, the number of senior HR staff bounced back sharply between 2011 and 2012 with a 22,000 increase to a total of 136,000, 17,000 more than the equivalent figure in 2001.

The number of ‘big hat’ HR honchos is thus around 14% higher and the level of HR staff in general almost a quarter (23.5%) higher than in 2001.  The share of HR in total employment has likewise increased from 1.3% to 1.5%. This is great news for the HR profession but is also somewhat disconcerting. While HR employment has increased considerably in both absolute and relative terms in the past decade this hasn't had any discernible effect on outcome measures of things one might expect HR to have a positive influence on.

Surveys suggest that the average rate of what is now fashionably called ‘employee engagement’ has flat-lined in the UK since this began to be measured in the early 2000s. Growth in labour productivity meanwhile has, as we are constantly being told, been even more disappointing. It might be argued that things would have been even worse had we not created more HR jobs but on the face of things HR appears to have offered a smaller bang for the buck in recent years.

HR professionals rightly call upon organisations to adopt better people management practice in order to raise levels of employee engagement and boost productivity. But in doing so HR must also demonstrate that it is genuinely adding value to organisations and is not just a compliance or administrative function.  The UK has a lot more HR hats and a lot more big and high paid HR hats, yet the ‘cattle’ are no more engaged or more productive. Before the HR profession points the finger of blame about poor workplace performance it needs to explain why its own influence appears so ineffective          

Jobs schemes boost latest jobs figures

I’ve just been looking at the monthly labour market statistics data release from the Office for National Statistics, mostly covering the period July-September. On the face of things these are another good set of quarterly jobs figures with 100,000 more people in work and unemployment down by 49,000, although the 10,000 rise in JSA claimant unemployment in October takes away some of the shine as does very weak growth in average earnings. The annual rate of growth in regular pay (excluding bonuses) has dropped across all the major sector groupings, to just 1.9% on average, so still lagging price inflation. Employment may have become oddly decoupled from what’s happening in the wider economy but viewed in the full perspective of jobs, productivity and pay the UK labour market remains in a state of distress.   

The number of employees in employment has increased by 87,000 while self-employment has fallen by 11,000. Significantly more than a fifth (22,000) of the net increase in total employment and almost half the fall in unemployment is due to a big quarterly rise in the number of people employed on government supported employment and training schemes. Many of these will be core jobless young people not in full-time education targeted by measures such as the Youth Contract. The number of unemployed people aged 16-24 in the core jobless category fell by 65,000 on the quarter, compared with an increase of 17,000 in 16-24s looking for work while in full-time education. This suggests that help for the target group of core jobless may be substituting for jobs that would otherwise have been taken by those in education.

The high proportion of scheme supported jobs in total new jobs this quarter distorts the underlying trend in growth in full-time and part-time jobs. Even so, it’s good to see signs of increased working hours and at last a welcome fall of 11,000 in the number of people working part-time because they can’t find a full-time job. It would seem that the jobs story in the most recent quarter is not so much one of full-time vs. part time work as temporary as opposed to permanent work, with an increase to 0.65 million in the number of people working as temps because they can’t find permanent jobs.

Also welcome in these latest figures is a surprising quarterly reversal of the traditional north-south divide across the English regions, with the North East, North West, Yorkshire and Humberside and West Midlands easily outperforming London, the South East and the East Midlands both in terms of increased employment and lower unemployment. The South East labour market looks to have weakened markedly since the spring while in London the temporary boost provided by the Olympics appears to be on the wane.

What jobs are being created?

It’s been a remarkable year in Britain’s jobs market. A flat economy has added more than 500,000 net new jobs – an annual employment growth rate of around 2% that one would normally expect only in a period of strong growth in GDP. There has been much discussion of this puzzling outcome which, even more remarkably, has occurred alongside large scale public sector job cuts. Most comment has focused on self-employment and part-time employment which together account for the bulk of the increase. Yet relatively little attention has been given to the types of jobs that have been created, or for that matter lost, during the surprising jobs boom. I’ve therefore looked at what at present available Office for National Statistics (ONS) data reveal about employment change by occupation in the past year.  

Managerial and professional jobs dominate the top 10 positions in the league table of UK job growth between April-June 2011 and April-June 2012, with big gains for Production Managers and Directors in Manufacturing (up 33,000, 13%), Human Resource (HR) managers and Directors (up 22,000, 19.2%), Management Consultants and Business Analysts (up 18,000, 12.3%), Quality Assurance and Regulatory Professionals (up 18,000, 29.5%), and Information Technology (IT) Specialist Managers (up 18,000, 10.3%).  However, Sales and Retail Assistants saw the biggest jobs gains (up 77,000, +7.2%), while the number of Chefs in employment also increased substantially (up 27,000, 14.4%).

The majority of the 10 occupations registering the biggest jobs losses are outside the managerial and professional groups, with the impact of the recession and cuts in public expenditure apparent in falling employment of Electricians and Electrical Fitters (down 26,000, 9.3%), Plumbers and Heating and Ventilating Engineers (down 24,000, 12.6%), Nursing Auxiliaries (down 32,000, 10.6%), Teaching Assistants (down 25,000, 7.1%), Youth and Community Workers (down 25,000, 30%) and Local Government Administrative Occupations (down 18,000, 10.5%).  Other occupations shedding substantial numbers of jobs include Electrical Engineers (down 17,000 36.9%), Medical Practitioners (down 15,000, 6.2%), Special Needs Education Teaching Professionals (down 14,000, 19.7%), Further Education Teaching Professionals (down 13,000, 9.4%) and Police Officers below sergeant level (down 12,000, 6.9%).

From the available data I also estimate that 1 in 14 UK workers (2.1 million or 7.1% of all people in employment) are back office workers. Of these 0.7 million work in finance, 0.4 million in HR, 0.4 million in IT and 0.6 million in back office administration. The number of back office jobs increased by more than 100,000 (4.8%) between 2011 and 2012, in percentage terms more than double the net increase in total employment.      

This analysis overall shows that the recent ‘jobs boom’ is a mix of good news for some groups of workers but bad news for others. While the net job gain is most welcome, at a time of economic austerity and mounting social distress it’s obviously worrying that we are shedding so many front-line public sector jobs in areas like health, teaching, policing and youth and community support work.    

Moreover, in a period of falling labour productivity it’s also very puzzling to see so many back office jobs being created. HR managers and IT professionals may be important to our increasingly knowledge based and personalized service based economy but it’s nonetheless surprising to see a surge in back office jobs at this stage in the economic cycle.  

Jobs reality less cosy than life on planet Randall

I quite like watching Jeff Randall’s live evening business programme on Sky News. I’ve appeared on it once or twice and found Mr Randall courteous as well as challenging. On occasion I’ve also tuned it to hear my own views and forecasts being questioned, notably back in November 2010 when I was working as Chief Economic Adviser to the Chartered Institute of Personnel and Development (CIPD). And although I have now moved on it’s my views that are implicitly under attack in Mr Randall’s criticism of the CIPD as being part of a so-called ‘Armageddon Alliance’, published in this morning’s Daily Telegraph. http://www.telegraph.co.uk/finance/comment/jeffrandall/9639842/Armageddon-It-doesnt-look-like-it-to-me.html I therefore think it necessary to put the record straight on a number of counts.

In my 30 years as a professional economist I’ve always steered an independent line on policy issues, and did so throughout my 12 years at the CIPD which is itself a fiercely independent professional membership organisation. This has at times caused me to disagree with politicians and commentators of every hue.

As someone who takes a broadly Keynesian view of macroeconomics, I have argued consistently since 2010 that the coalition’s policy of rapid severe fiscal austerity is misguided in an economy struggling to escape the trauma of the worst global post-war financial crisis. I continue to hold this opinion and cite the experience of the past two years, in which the economy has experienced almost no overall net expansion in output, as proof in support of those who share my view. And on this matter I make no apology in acknowledging that my opinion is far closer to that of the Shadow Chancellor of the Exchequer than to the present incumbent of 11 Downing Street.  

It is, however, my analysis of the labour market that requires most scrutiny. My reckoning in 2010 was that the coalition government’s fiscal austerity measures would eventually result in a gross loss of 1.6m million jobs across both the public and private sectors of the economy. The net effect on employment would then depend on the strength of any subsequent recovery in private sector employment, which would in turn depend on the overall strength of the economy.    

I have so far seen no reason to alter my estimate of the gross employment effect of austerity. While my estimate that public sector employment would fall by more than 700,000 was widely ridiculed in 2010 this is precisely what the Office for Budget Responsibility (OBR) has been projecting since November 2011.  Redundancies in the construction and retail sectors, those parts of the private sector most obviously susceptible to cuts in public spending and the higher rate of VAT, have to date also been running in line with my expectations.

What has surprised me, however, is the strength of offsetting job gains, especially in 2012, which has resulted in a much bigger than expected net increase in employment. Having argued at the outset of the recession in 2008 that Britain’s flexible labour market was likely to respond to an economic shock far better than in earlier decades, I had anticipated a relatively fast rate of job creation once the economy started to grow again. Yet despite this I did not expect to witness net employment growth against the backdrop of economic stagnation. Indeed, my forecast for 2012, published by the CIPD last December, was for employment to fall and unemployment to rise to close to 2.9 million this year. But if this was an Armageddon forecast it was one shared by most other major forecasters, including the OBR.    

Just why the economy has been creating jobs without economic growth therefore remains a puzzle to most economists, especially when one also considers that the stock of unfilled job vacancies has, like the GDP growth rate, been flat-lining since 2010.  Putting to one side explanations that involve some error in either the GDP or jobs data, I think the answer lies in a slump in real wages – down around 7% since 2009 – and a tougher benefit regime that means jobless people fill part-time jobs that they might have turned down in previous recessions when, like now, there was a serious shortage of full-time vacancies.

This brings me, finally, to Mr Randall’s criticism that the CIPD is dismissive of people who have become self-employed during the recession, a group who in one of my final reports for the Institute I described as ‘odd jobbers’. Again not true. Self-employment is a welcome feature of our economy. I myself recently became self-employed. But just as jobless people who want full-time work have been turning to part-time employment to avoid the dole, so too the tens of thousands of people who have taken up self-employment but who in a stronger economy would probably choose to work as employees.

Having looked in detail at the rise in self-employment between 2008 and 2011, my CIPD report concluded that this was accounted for by individuals with characteristics very unlike the bulk of self-employed people. The latter tend either to be skilled professional consultants or trades people of the ‘white van man’ variety, in both cases working long hours. The ‘new self-employed’ by contrast are often unskilled and work hardly any hours at all – hence the ‘odd jobber’ tag.

Although the recent jobs market data have taken many people, myself included, by surprise, on closer examination the picture they paint is one consistent with an economy that is seriously short of demand rather than, as the tenor of Mr Randall’s article suggests, on the up. ‘Part-time/odd job/pay squeezed’ Britain might well be preferable to the kind of ‘doleful Britain’ seen in earlier decades but it is just as much a sign of ongoing economic malaise. And those of us who wish to point this out rather than act as cheerleaders for a flawed fiscal policy don’t deserve to be called ‘pedlars of gloom’.  

Much ado about nothing but construction

There’s always something slightly old fashioned about Office for National Statistics (ONS) media events and this morning’s press conference to announce the preliminary estimate of Q3 GDP was no exception. Avuncular chief economist Joe Grice delivered the news that the economy had grown by 1% between Q2 and Q3 – marking a statistical departure from the double-dip recession – with the air of a country solicitor telling assembled eager beneficiaries of a will that it’s a little too soon to be precise about the size of the bequest.

Mr Grice said that the latest growth estimate will have been affected, positively and negatively, by the impact on the economy of the Queen’s Diamond Jubilee bank holiday, unusually poor midsummer weather and the Olympic and Paralympic games. But just how big these effects are wasn’t yet clear, although the sales of tickets to the two sporting extravaganzas was reckoned to have added 0.2% to GDP in Q3.

However, what the sober statisticians did highlight was that even with the largest quarterly surge in output since before the start of the financial crisis in 2007 the economy was no bigger in Q3 than a year before and only 0.6% bigger than Q3 2010. The economy has thus been through three quarters of decline and one quarter of growth which roughly balance out. Given the furore that accompanies these GDP snapshots, good and bad, this could be a case of much ado about nothing. Yet that can’t be said about one particular sector, construction, which may hold the key to explaining why the economy has flat-lined over the past year.

Q3 was much better for both the production and service sectors which grew by 1.1% and 1.3% respectively (the latter, intriguingly, boosted most by output in the ‘government and other services’ sub-sector). But construction sector output contracted by 2.5% in the quarter, following a big contraction in previous quarters. While all such figures are subject to revision, these preliminary estimates suggest that the construction sector is producing 10.8% less than a year ago and a whopping 17% less than before the recession.

Why is this economically significant as well as important for construction firms and workers? Because construction is not only suffering very badly, in terms of jobs and pay as well as output,  but is also the one major part of private sector activity that is clearly being adversely hit by fiscal austerity.

The Chancellor may argue that broader economic forces, rather than cuts in public spending and investment, are the reason for our current woes. But the plight of the construction sector suggests otherwise. Mr Osborne may outline his own ideas for boosting infrastructure spending, and thus demand for construction projects, in the forthcoming autumn statement. However, the longer he waits the fewer the excuses he will have if the relatively good economic news in Q3 isn’t repeated well into next year.            

Mini jobs, maximum confusion

In common with some of you reading this blog, I spent much of yesterday at a seminar organised by the Office for National Statistics (ONS) listening to assembled economists and number crunchers puzzling over why Britain’s stagnant economy is somehow creating jobs by the bucket load albeit at the cost of a slump in labour productivity.

As is often the case at such events, most participants agreed there is a puzzle to solve but no one was fully convinced by any of the suggested explanations, though the ONS was at pains to stress there is nothing dodgy about the numbers it churns out. I therefore left feeling rather like one of those bemused coppers in television’s Silent Witness who can’t understand why after hours of picking over a horribly mutilated corpse the expert pathologists are unable to tell him how, let alone why, the victim died.   

I’m no less bemused this morning having sifted through the latest ONS labour market statistics. There’s no doubting the headline news is good – a quarterly June to August rise of 212,000 in the number of people in work and 50,000 fewer unemployed. August in particular appears to have been an amazingly strong month of almost Olympian proportions in the jobs market, the ONS monthly estimate suggesting that total unemployment may have dropped by more than 190,000 in that single month alone.

Best of all 18-24 year olds account for almost a quarter of the rise in employment, helping to cut total youth unemployment to below 1 million. And better still, these jobs have gone to NEETs, jobless young people not in education or training, rather than students looking for jobs to support them through college.

Yet not everything in the garden is rosy. 1 in 3 new jobs created in the latest quarter are ‘mini-jobs’ providing fewer than 15 hours paid work per week while more than half (54%) provide fewer than 30 hours. Moreover, the annual rate of growth in average earnings was just 1.7%, much slower than the corresponding rise in the Consumer Prices Index.    

For millions of people in work the downside of generating jobs in a stagnant economy is therefore low hours at low pay and with little prospect of getting a pay rise big enough to keep pace with price inflation.  A surge in low paid mini jobs may be better than no jobs at all but this is not a sign that the economy is experiencing anything like a proper recovery.