Wednesday, 16 October 2013

October 2013 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the monthly Labour Market Statistics (LMS) release for October 2013.   This summarises Labour Force Survey data for the period June to August 2013 and Jobseeker’s Allowance (JSA) claimant count data for September 2013.  Following previous months’ LMS releases, the data published today suggests small but increasingly consistent improvements in the key labour market indicators.   The employment rate increased slightly, by 0.3 percentage points on the previous quarter to 71.7% (reflecting an additional 155,000 individuals in employment), whilst the unemployment rate fell by 0.1 percentage points to 7.7% (with 18,000 fewer individuals defined as unemployed).  Economic inactivity, where individuals are neither employed nor unemployed, has also fallen on the previous quarter.  Finally, the more timely measure of claimant count unemployment fell between September and August, for the fourth consecutive month.

These broadly positive developments are consistent with a range of business survey findings that suggest increasing confidence among employers.  Positive expectations for sales (including exports) have translated into increasing recruitment activity.  For example, the Derbyshire and Nottinghamshire Chamber of Commerce survey for the third quarter of 2013 found a positive balance of firms reporting increased sales in both domestic and export markets and fuller order books compared to the previous quarter, whilst confidence in future profitability and turnover had increased.  

The Bank of England’s Agents’ Report for September 2013 provides further indications of improvements in business conditions, including growth in consumer spending over the summer (associated with the good weather) and increasing confidence amongst borrowers due to the ‘forward guidance’ provided by the Bank that interest rates will remain low.  The Agents’ Report also provides a more positive assessment of the UK construction sector, which had been particularly affected by a steep fall in output and associated job losses following the onset of recession, with indications of strengthening construction output driven by an upturn in house building activity.

However, the October LMS release continues to provide a concerning picture of weak wage growth, with total wages (including bonuses) only 0.7% higher in the period June to August 2013 compared to the same period in 2012.  With higher than expected inflation announced for September, at 2.7% as measured by the CPI, this means that real wages are continuing to fall.  Wage growth has been below the rate of inflation in almost every quarter since the onset of recession in 2008.  The inflation estimate for September is also particularly important, as it is the inflation figure used to calculate Local Authority business rates for the next year.  The Guardian estimates that the current rate of inflation will result in an additional £242 million in business rate payments from high street retailers, potentially putting jobs at risk in this sector.

Unemployment and Employment Rates
LFS data for the three months to August 2013 indicates that the unemployment rate[1] fell slightly on the previous quarter (March to May 2013), by 0.1 percentage points to 7.7% of the economically active population aged 16 and over.  The number unemployed fell by 18,000 on the previous quarter and by 40,000 on the same period a year earlier.  The total number of adults currently estimated to be unemployed is 2.49 million.

The change in the numbers of long-term unemployed has been mixed.  Those who have been unemployed for between 6 and 12 months has fallen slightly on the previous quarter and the same period a year earlier, to a total of 446,000.  The number of people unemployed for over 12 months has fallen slightly on the previous quarter but has increased on the same period a year earlier, to total 900,000.  The number of young people (16-24 year olds) unemployed was estimated to be 958,000.  This is equivalent to 21% of economically active young people, which increased by 0.1 percentage point on the previous quarter. 

The employment rate (for adults aged 16-64) for June to August 2013 increased on the previous quarter, by 0.3 percentage points to 71.7%.  Compared to the same period a year ago, the rate has increased by 0.4 percentage points.  The total number of people in employment was 29.87 million, up 155,000 from the previous quarter and 279,000 on the same period a year earlier.  That this has not resulted in a more significant an increase in the employment rate (those employed as a percentage of the total working age population) is due to the continuing strong growth in the total size of the UK working-age population.

Earnings Estimates
Earnings growth remains weak and below the rate of inflation.  Total pay (including bonuses) increased by only 0.7% between the periods June -August 2012 and June-August 2013, whilst regular pay (excluding bonuses) increased by only 0.8%.  This is significantly lower than the earnings growth estimated for previous quarters: total pay for the 3 months to July 2013 was estimated to be 1.2% on the previous year, whilst total pay growth was estimated to be 2.2% for the 3 months to June 2013. 

Time series analysis published by the ONS show that earnings growth (both total and regular pay) has been below the rate of inflation in almost every quarter since in the onset of recession in 2008.

Job Seekers’ Allowance Claimants
The number of Jobseekers’ Allowance (JSA) claimants in September 2013 fell on the previous month, by 41,700, whilst the rate was down 0.1 percentage points to 4% (and down 0.6 percentage points on the same month a year earlier).  This is the fourth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies
In the three months to August 2013, 132,000 people were made redundant, up 14,000 from the previous quarter but broadly level with the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the period July to September 2013 increased by 6,000 on the previous quarter to total 541,000.  The number of ILO unemployed adults to every one vacancy in the three months to August 2013 was 4.7, down 0.1 percentage points on the previous quarter.

Key Regional Developments
  • Unemployment rates and levels fell compared to the previous quarter in the North East, Yorkshire and the Humber, the West Midlands, the East of England, and the South East.  The most significant falls were estimated to be in the West Midlands, with a fall in unemployment of 14,000 individuals and 0.4 percentage points, and the East of England, with a fall in unemployment of 20,000 individuals and 0.7 percentage points.  The East of England had the lowest unemployment rate of the nine English regions in June to August 2013, at 5.9%.
  • However, unemployment increased significantly on the previous quarter in the North West and the South West, by 24,000 and 16,000 individuals respectively.  The highest rate of unemployment continues to be in the North East, at 10.3%.
  • In the East Midlands, the number unemployed increased very slightly, by 1,000 individuals on the previous quarter, but the unemployment rate remained unchanged, at 7.7% - in line with the UK average.  This is equivalent to 177,000 individuals unemployed in the region over the period June to August 2013.
  • The employment rate in the East Midlands also increased slightly on the previous quarter, by 0.2 percentage points (or 5,000 additional individuals in employment), to 71.5% - slightly below the UK average of 71.7%.
  • It is possible for both the employment and the unemployment rates to increase at the same time because the number of economically inactive adults (neither employed nor unemployed) has fallen - by 7,000 individuals compared to the previous quarter.  This could be due to individuals who had previously been full-time carers of children or elderly relatives starting to look for work, as well as individuals who had been economically inactive due to illness or disability re-entering the labour market.

[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.