Wednesday, 14 November 2012

November 2012 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the Labour Market Statistics First Release for November, which includes Labour Force Survey data for the period July to September 2012 and Jobseekers’ Allowance (JSA) data for October.   Although the number of adults in employment has increased, the extent of increase is weaker than reported last month.  Moreover, whilst the quarterly LFS measure of unemployment indicates a further fall, the more timely monthly claimant count unemployment has increased by the largest amount in 13 months.  Long-term unemployment (those unemployed for more than a year on the LFS measure) has also increased.  These developments could point to a weakening in the labour market following the recent period of recovery – although it is too early to say with any certainty.  This month’s data has received a more cautious reception in the media compared to previous months, with the BBC reporting city commentators like Howard Archer (chief UK economist at IHS Global Insight) observing a  “softening in the [UK] labour market's recent impressive resilience".

As we have noted in earlier monthly briefings, earnings growth remains weak – with total pay (including bonuses) increasing by 1.8% on the same period a year earlier.  With the news reported yesterday that inflation (on the CPI measure) had increased from 2.2% to 2.7% between September and October 2012, this continues to point to pressure on household incomes.

Over a longer time period, it is again pertinent to point out just how little unemployment has increased during this recession compared to the recessions in the 1990s and 80s, especially when one considers the depth of the contraction in economic output experienced in the last five years.  The latest estimate for the number of adults unemployed on the LFS measure is only 865,000 higher than the same period in 2007 (July to September).   As mentioned in our briefings last month and in August, a glance at the labour productivity estimates helps us understand what may be happening.  The lower than expected increases in unemployment through the Great Recession have been accompanied by falling labour productivity and rising unit labour costs – indicating that employers have been ‘hoarding’ labour, in order to retain skilled staff despite falling production levels.  The further fall in labour productivity indicated in this month’s data, alongside recent business survey results that point to falling output in both manufacturing and the services, suggests that the retention of this spare capacity may soon prove unsustainable – leading to possible falls in employment over the coming months.

Unemployment and Employment Rates
LFS data for the three months to September 2012 indicate that the unemployment rate[1]  has fallen by 0.2 percentage points on the previous quarter, to 7.8% of the economically active population, which is equivalent to 2.51 million individuals.  This is 49,000 lower than the previous quarter and 110,000 lower than the same period a year earlier.   The number of young people (16-24 year olds) who are unemployed fell by 49,000 on the previous quarter – to reach 963,000.  This is equivalent to 20.7% of young people.

However, long-term unemployment (adults unemployed for more than year) increased by 12,000 on the previous quarter, to reach 894,000 individuals. 

The employment rate (for adults aged 16-64) increased slightly, by 0.2 percentage points on the previous quarter, to 71.2%.  The total number of people estimated to be in employment is 29.58 million, up 100,000 on the previous quarter.   However, this increase is less than half the increase reported in last month’s statistical first release.  The employment rate remains lower than its pre-recession peak of 73% (March-May 2008).

Both full-time and part-time employment increased, by 51,000 and 49,000 respectively.   Compared to previous months, the increase in part-time employment appears particularly weak.

Earnings Estimates
Earnings estimates continue to point to weak growth in average pay levels, with regular pay (excluding bonuses), rising by 1.9% between the three months to September 2012 and the same period a year earlier.  Total pay (including bonuses) increased by 1.8% .  In both measures, earnings growth between the latest quarter (July-September 2012) and the same period a year earlier is only 0.1 percentage points higher than the growth between June-August 2012 and the same period a year earlier.

Labour Productivity and Unit Labour Costs
The amount of (inflation adjusted) output per worker fell by 1.1.% between quarter 1 and quarter 2 of 2012 whilst unit labour costs increased by 0.3% over the same period.

Job Seekers’ Allowance Claimants
Jobseekers’ Allowance (JSA) claimants in October 2012 increased by 10,100 on the previous month, to reach 1.58 million.  The claimant count rate was 4.8%, unchanged from the previous month and the same period a year earlier.

Redundancies and Vacancies
In the three months to September 2012, 128,000 people had become redundant, down 22,000 from the previous quarter and down 19,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to October 2012 was 479,000 -  up 1,000 compared to the previous quarter and up 16,000 on the same period a year earlier.  The number of ILO unemployed adults to every one vacancy in the three months to September 2012 has fallen to 5.2, compared to 5.4 in the previous quarter.

Key Regional Developments
  • The level of unemployment fell compared to the previous quarter in the North East, North West, Yorkshire and the Humber, the West Midlands and the East Midlands – most significantly in the North West, by 26,000 and 0.7 percentage points, and in Yorkshire and the Humber, by 20,000 and 0.7 percentage points. The North East continues to have the highest unemployment rate of the nine English regions, at 9.8%, followed by Yorkshire and the Humber, at 9.1%.
  • Unemployment levels increased in the East of England, London and the South East, by 8,000, 6,000 and 6,000 respectively, although the rates remained largely unchanged.
  • In the East Midlands, employment fell slightly on the previous quarter, by 3,000 or 0.2 percentage points, to a rate of 71.4%, slightly higher than the UK average of 71.2%.  Unemployment also fell, by 15,000 and 0.6 percentage points, to a rate of 7.7% (compared to 7.8% in the UK).  Employment and unemployment both decreased in the East Midlands due to a corresponding increase in Economic Inactivity (with 19,000 more adults economically inactive compared to the previous quarter).  This could represent an increase in the number of people in full-time education as well as an increase in ‘discouraged workers’ (individuals who have been unemployed for long periods of time and have given up looking for work, thus no longer meeting the ILO criteria for unemployment).

[1] According to the International Labour Organisation (ILO), this is defined as those who are out of work but available for, and actively looking for, employment within a set period.  This is expressed as the proportion of ‘economically active’ (employed plus unemployed) adults.