Wednesday, 23 January 2013

January 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics for January 2013, which covers Labour Force Survey data for the period September to November 2012 and Jobseekers’ Allowance (JSA) claimant data for December 2012.  A very slight increase in employment and a small decrease in unemployment point to a flatter trend than earlier in 2012.  Increases in employment reported in previous months have been significantly greater.  On balance, the labour market between September to November 2012 and the previous quarter could be described as broadly flat, with a few interesting exceptions.  

In contrast to earlier in 2012, when part-time jobs were largely responsible for the net increases in employment, the latest data indicates a stronger increase in full-time employment compensating for a small fall in part-time employment.  

In previous briefings, we have also drawn attention to falling labour productivity (output per worker) and increasing labour costs – together supporting the view that employers were ‘hoarding’ excess labour, a strategy that may become unsustainable in the future if demand does not increase.  However, the latest data indicates a slight increase in output per worker and a slight fall in labour costs.  These estimates (for Quarter 3 of 2012) coincide with a period of overall output growth (with Q3 GDP growth estimated to be 0.9%).  Various survey evidence published recently, such as data from the Purchasing Managers’ Index published just before Christmas, indicate a significant fall in service sector activity at the end of 2012, strongly suggesting that the final quarter of the year could see a return to negative growth – meaning that the slight increase in output per worker and fall in labour costs could be short-lived

Weak earnings growth has been observed through most of 2012, with previous data releases indicating below inflation rates of earnings growth.  The latest data is consistent with this, indicating that regular pay (excluding bonuses) rose by only 1.4% between September-November 2012 and the same period a year earlier, compared to the latest CPI inflation estimate of  2.7%.

Media coverage of today’s data has generally been positive, with the BBC drawing attention to continued falls in Jobseekers’ Allowance claimants, to reach the lowest level since June 2011, alongside falls in long-term unemployment on the Labour Force Survey measure.  However, a slight increase in youth unemployment has also been picked up in the press coverage – notable given the rate and number of 16-24 year olds classed as unemployed had previously been falling since early 2012.

Unemployment and Employment Rates
LFS data for the three months to November 2012 indicate that the unemployment rate[1]  has fallen by 0.1 percentage points on the previous quarter, to 7.7% of the economically active population, which is equivalent to 2.49 million individuals.  This is 37,000 lower than the previous quarter and 185,000 lower than the same period a year earlier.   However, the number of young people (16-24 year olds) who are unemployed increased very slightly, by 1,000 on the previous quarter, to reach 957,000 (20.5% of the economically active population in that age band).

Long-term unemployment (adults unemployed for more than one year) fell by 5,000 compared to the previous quarter, to a total of 892,000 individuals across the UK.

The employment rate (for adults aged 16-64) increased slightly, by 0.1 percentage points on the previous quarter, to 71.4%.  The total number of people estimated to be in employment is 29.68 million, up 90,000 on the previous quarter.   The employment rate is 1.1 percentage points higher than the same period a year earlier, although it remains lower than its pre-recession peak of 73% (March-May 2008).

Full-time employment increased by 113,000 on the previous quarter whilst the number of people in part-time employment fell by 23,000.  However, despite this recent fall, over the year there has been a strong increase in part-time employment, with 95,000 more men and 144,000 more women working part time in September to November 2012 compared to the same period in 2011.

Earnings Estimates
Earnings estimates continue to point to weak growth in average pay levels, with regular pay (excluding bonuses), rising by only 1.4% between August to October 2011 and August to October 2012, whilst total pay (including bonuses) increased by 1.5% over the same period.  This increase is lower than that reported in previous months (for example, the November 2012 Labour Market Statistics estimated a 1.9% increase in regular pay), suggesting that although employment continues to rise, UK workers also continue to experience reductions in real-terms pay (with the rate of inflation currently estimated to be 2.7% on the CPI measure).

Labour Productivity and Unit Labour Costs
In contrast with previous data releases, the amount of (inflation adjusted) output per worker increased slightly, by 0.6%, between the second and third quarters of 2012.  This coincided with the period in which the overall output of the UK economy was estimated to grow by 0.9%.  Conversely, unit labour costs are estimated to have  fallen very slightly over the same period, by 0.1%.

Job Seekers’ Allowance Claimants
The number of Jobseekers’ Allowance (JSA) claimants in December 2012 fell slightly on the previous month, by 12,100 across the UK, whilst the rate remained unchanged from previous months, at 4.8%.

Redundancies and Vacancies
In the three months to November 2012, 158,000 people were made redundant, up 27,000 from the previous quarter but down 6,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to December 2012 was 494,000 -  up 10,000 compared to the previous quarter and up 33,000 on the same period a year earlier.  The number of ILO unemployed adults to every one vacancy in the three months to November 2012 has fallen to 5.1, compared to 5.3 in the previous quarter.

Key Regional Developments
  •        The level of unemployment fell compared to the previous quarter in the North East, Yorkshire and the Humber, London and the South West – most significantly in London, by 26,000 and 0.6 percentage points, and the North East, by 10,000 and 0.8 percentage points.  However, the North East continues to have the highest unemployment rate of the nine English regions, at 9.1%, followed by the West Midlands, at 8.9%.
  •       Unemployment levels increased in the North West, the East Midlands, the West Midlands, the East of England, and the South East – most significantly in the East Midlands, by 10,000 individuals and 0.4 percentage points, and the West Midlands, by 13,000 individuals and 0.3 percentage points.
  •       In the East Midlands, employment also fell slightly on the previous quarter, by 3,000 individuals or 0.5 percentage points.  The overall employment rate in the East Midlands for the period September to November 2012 was level with the UK average, at 71.4%, whilst the unemployment rate was higher, at 8.2% compared to 7.7%.   With the exception of London (with an unemployment rate of 8.3%), the latest data indicates a very clear north-south divide, with the five Midlands and Northern regions all having unemployment rates in excess of 8%, whilst the East of England, the South West and South East all have unemployment rates below 7%.

[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.