September 2014 Labour Market Statistics Briefing

Yesterday morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for September.  This draws on Labour Force Survey data for the period May to July 2014 and Jobseekers’ Allowance (JSA) claimant count data for August.

These latest estimates indicate a continuation in the positive general trends observed since the end of 2011, with employment rising and unemployment falling.  However, earnings growth remains very weak – and well below the rate of general price inflation.  Sub-inflation rates of earnings growth were observed for much of the period of recession starting in 2008, and have subsequently shown little signs of improvement despite the recovery in other key indicators. 

The number in employment in the UK increased on the previous quarter (February to April 2014), although the increase was relatively small (74,000) - the smallest quarterly increase in employment since April to June 2013.    The fall in unemployment (of 146,000) was more significant.  This can be partly explained by an increase in economic inactivity (individuals who are neither employed nor unemployed), which rose by 114,000 on the previous quarter.  This increase was principally due to 41,000 more individuals staying at home to look after family members and 33,000 and 8,000 more individuals who were long-term and temporarily sick respectively.  The number of individuals who were economically inactive because they were full time students (the largest group of economically inactive) only increased slightly on the previous quarter (and fell on the previous year), whilst the  number of retirees and ‘discouraged workers’ (those who were not looking for work because of a lack of available jobs) both fell on the previous  quarter and the year.

The key positive development that has been widely reported in the news is that fact that the JSA claimant count fell below 1 million for the first time since August 2008.  However, the weak rate of pay growth has also been emphasised, with a 0.6% increase in total pay (including bonuses) in the period May to July 2014 compared to the same period a year earlier, below the rate of general price inflation (1.5% on the CPI for the 12 months to August).  This has sometimes been reported misleadingly, with the Guardian claiming signs that the  “pay squeeze may be easing” by comparing the latest estimate to that published in August  (-0.2% for the period April to June 2014), despite the fact that the ONS strongly advise against comparing consecutive monthly releases, given the 2 overlapping months within the 3-month Labour Force Survey periods.   In the previous non-overlapping quarter (February to April 2014), total pay grew by 0.8% -  close to the latest estimate of 0.6% and also significantly below the rate of general price inflation at that time, demonstrating the lack of significant change in earnings growth through 2014 so far.

Unemployment and Employment Rates

According to the latest Labour Force Survey, for the period May to July 2014, the unemployment rate[1] fell 0.4 percentage points on the previous quarter to 6.2% of the economically active population aged 16 and over.  This is the lowest rate since the period August to October 2008, as the recession began to impact the UK labour market.  However, it remains higher than rates maintained prior to the recession, which were consistently lower than 6% throughout the period 2000 to 2007.   The number unemployed fell by 146,000 on the previous quarter, to 2.02 million adults. 

The number of people unemployed for over one year has also decreased, by 67,000 on the previous quarter (to a total of 723,000).

Youth unemployment also fell on the previous quarter, from 18.5% to 16.6 % of economically active 16 to 24 year olds (equivalent to 747,000 individuals).  However, this remains significantly higher than the pre-recession rate of 13.8% (December 2007 to February 2008).

The employment rate (for adults aged 16-64) increased very slightly on the previous quarter, by 0.1 percentage points to 73%, which is equivalent to 30.61 million resident adults in employment in the UK (an increase of 74,000 on the previous quarter).   This is significantly smaller than the increase in employment reported in previous months, and is the smallest quarterly increase since April to June 2013.

In previous recent LMS releases, self-employment has accounted for a large share (and in the some cases the majority) of the increase in the number of individuals in employment.  In the latest LMS, the number of additional self-employees is relatively small (4,000 on the previous quarter) and the increase in employees is much larger (65,000 on the previous quarter).

Earnings Growth

Between May to July 2014 and the same period a year earlier, total pay (including bonuses) rose by 0.6%, very significantly below the rate of general price inflation  (1.5% on the CPI in the 12 months to August 2014).  Regular pay (excluding bonuses) rose by 0.7%.  

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in August 2014 fell on the previous month, by 37,200, whilst the rate was down 0.1 percentage points to 2.9% (and down 1.3 percentage points on the same month a year earlier).  This is the fifteenth consecutive month in which the rate of claimant count unemployment has fallen and the first time since 2008 that the number of JSA claimants has fallen to below 1 million, at 966,500 individuals.

Redundancies and Vacancies

In the three months to July 2014, 91,000 people were made redundant, 29,000 fewer than the previous quarter and the lowest number of redundancies recorded in a quarter since comparable records began in 1995.

The number of vacancies (advertised through Jobcentre Plus) in the three months to August 2014 increased by 23,000 on the previous quarter to total 673,000.  The number of ILO unemployed adults to every one vacancy in the three months to July 2014 was 3.1, down 0.3 on the previous quarter.

Key Regional Developments

• Compared to the previous quarter, unemployment rates and levels fell in seven of the nine English regions – only increasing in the North East and the South West (by 1,000 individuals and 0.1 percentage points on the previous quarter in both regions). The highest unemployment rate continues to be in the North East, at 9.9%.
•  Unemployment fell most significantly in the North West, Yorkshire and the Humber and the East of England.  In the period May to July 2014, the lowest rate of unemployment was in the South East, at 4.4%.
• In the East Midlands, the unemployment rate fell by 0.5 percentage points on the previous quarter to 5.6%, below the national average of 6.2%.  This is equivalent to 12,000 fewer individuals unemployed compared to the previous quarter.  The total number unemployed in the region in the three months to July 2014 was 130,000.
• The rate of employment remained stable in the East Midlands, at 73.8%, whilst the number of people employed increased very slightly, by 1,000 on the previous quarter.  The employment rate in the region is higher than the UK average, which was 73% in the three months to July 2014.

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[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.

July 2014 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for July.  This draws on Labour Force Survey data for the period March to May 2014.

There continues to be very positive developments in labour market participation, with the latest employment rate equal to the highest rate on record (73.1% - which was last attained in the three months to February 2005).  Unemployment has fallen significantly, to the lowest rate since the three months to December 2008.  There was also a significant fall in the number of people who were economically inactive (out of work but not actively seeking employment, such as those with long-term illnesses, full-time study or caring responsibilities, or ‘discouraged workers’ – individuals who have been unemployed for long periods of time and have given up looking for work).

However, earnings growth continues to be very weak, significantly lower than the rate of inflation, with the rate of regular pay growth (which excludes bonuses) at the lowest level since comparable records began -  at only 0.7%, compared to the rate of general price inflation of 1.9% on the Consumer Price Index for the 12 months to June.  This has been a key characteristic of the UK labour market throughout the recession that started in 2008 and the subsequent period of recovery.  Employment levels and rates did not fall by anything like the extent experienced in previous recessions in the 1970s, 80s and 90s, but earnings growth has remained weak for much of the period – and has not recovered as employment has increased and unemployment has fallen.  This is due to weak productivity through much of the period and a shift in the structure of employment, including increased part-time working and a higher proportion of self-employment – particularly in low pay, low skilled activities.

From an employer perspective, the Derbyshire, Nottinghamshire and Leicestershire Chambers of Commerce Quarterly Economic Survey (QES) for the second quarter of 2014 indicates a strengthening recovery.  Compared to quarter 1 of 2014, an increased proportion of firms stated that they were now operating at full capacity and an increased proportion had sought to recruit new staff over the three months prior to interview.  Looking forwards over the next 12 months, the majority of respondents expected turnover to rise.  However, firms reported concerns over difficulties in recruiting skilled staff  - which was particularly a challenge for manufacturing firms. 

Unemployment and Employment Rates

According to the latest Labour Force Survey, for the period March to May 2014, the unemployment rate[1] fell 0.4 percentage points on the previous quarter to 6.5% of the economically active population aged 16 and over.  This is the lowest rate since the period October to December 2008, as the recession began to impact the UK labour market.  However, it remains higher than rates maintained prior to the recession, which were consistently lower than 6% throughout the period 2000 to 2007.   The number unemployed fell by 121,000 on the previous quarter, to 2.12 million adults. 

The number of people unemployed for over one year has also decreased, by 57,000 on the previous quarter (to a total of 749,000). 

Youth unemployment also fell on the previous quarter, from 19.1% to 17.8% of economically active 16 to 24 year olds (equivalent to 817,000 individuals).  However, this remains significantly higher than the pre-recession rate of 13.8% (December 2007 to February 2008).

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.5 percentage points to 73.1%, which is equivalent to 30.64 million resident adults in employment in the UK (an increase of 254,000 on the previous quarter).   This is the highest number in employment since comparable records began (in 1971) and the employment rate is now level with the highest comparable rate (for the period December 2004 to February 2005).

Although self-employment accounted for a significant proportion of the total increase in employment, the increase in the number of employees accounted for a larger share - at 190,000 additional employees compared to 78,000 additional self-employed on the previous quarter.  However, the number of self-employed continues to increase at a faster rate than the number employed (at 1.7% compared to 0.7% on the quarter and 12.8% compared to 9.7% on the same period a year earlier), although the number of employees accounts for a large majority of total current employment (25.8 million compared to 4.6 million self-employed).

Earnings Growth

Between March to May 2014 and the same period a year earlier, total pay (including bonuses) rose by 0.3%, very significantly below the rate of general price inflation  (1.9% on the CPI in the 12 months to June 2014).  Regular pay (excluding bonuses) rose by 0.7%.  

This was the lowest rate of regular pay growth since comparable records began in 2001 and reflects low pay growth across a wide range of sectors, particularly the finance & business services and construction sectors where regular pay growth was negative ( -0.7% and -1.3% respectively on the same period a year earlier).

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in June 2014 fell on the previous month, by 36,300, whilst the rate was down 0.1 percentage points to 3.1% (and down 1.2 percentage points on the same month a year earlier).  This is the thirteenth consecutive month in which the rate of claimant count unemployment has fallen.

Redundancies and Vacancies

In the three months to May 2014, 116,000 people were made redundant, unchanged from both the previous quarter and the same period a year earlier but down 194,000 on the high point of 310,000 recorded in the period February to April 2009.

The number of vacancies (advertised through Jobcentre Plus) in the three months to June 2014 increased by 30,000 on the previous quarter to total 648,000.  The number of ILO unemployed adults to every one vacancy in the three months to May 2014 was 3.3, down 0.5 on the previous quarter.

Key Regional Developments

• Compared to the previous quarter, unemployment rates and levels fell in seven of the nine English regions – only increasing in the North East (by 5,000 individuals and 0.3 percentage points on the previous quarter) and the South West (by 3,000 individuals and 0.1 percentage points).  The highest unemployment rate continues to be in the North East, at 9.6%.
•  Unemployment fell most significantly in the East Midlands, the West Midlands and the South East.  In the period March to May 2014, the lowest rate of unemployment was in the South East, at 4.4%.
• In the East Midlands, the unemployment rate fell by 1.4 percentage points on the previous quarter - the largest fall of the nine regions - to 5.6%, significantly below the national average of 6.5%.  This is equivalent to 30,000 fewer individuals unemployed compared to the previous quarter.  The total number unemployed in the region in the three months to May 2014 was 133,000.
• The rate of employment increased significantly in the East Midlands, again by the largest amount of the nine regions – by 2 percentage points on the previous quarter, to a rate of 74.4% (exceeding the UK average of 73.1%).  This is equivalent to 61,000 more individuals in employment compared to the previous quarter.

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[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.

June 2014 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for June.  This draws on Labour Force Survey data for the period February to April 2014 and Jobseekers’ Allowance claimant data for May 2014.

The latest data indicates a strong increase in the numbers employed (up by 345,000) and a significant fall in unemployment (down by 161,000) compared to the previous quarter.  Although the employment rate remains slightly below the pre-recession high-point, the differences is now extremely small.  There is a strengthening recovery in overall labour market participation – which is more significant and more sustained than the period of recovery experienced from early 2010 to early 2011.

However, two issues of significant concern remain.  Firstly, the nature of the increase in employment – with continued high numbers of individuals becoming self-employed and continued growth in the number of people working part-time (although the proportion who are working part-time because they could not find full-time employment has fallen slightly, from 18% in February to April 2013 to 17.5% in the latest quarter).  Last month, attention was drawn to analysis by the ONS, that indicated that the majority (84%) of the increase in the self-employed since 2008 were workers over 50, who were increasingly likely to be working in low-skill, relatively low-pay roles – described by the TUC as rising proportions of ‘odd jobbers’ rather than new business owners.  This concern continues to be emphasised in today’s Guardian, although a City commentator quoted in the BBC (David Tinsley from BNP Paribas) note that the increase in employees accounted for a higher share of additional employment in the latest data (when self-employment had accounted for all or the majority of the increase in employment in a number of previous monthly LMS releases).

Secondly, wage growth remains weak and, in the latest data, is significantly lower than the rate  of inflation in terms of both total (including bonuses) and regular pay.  This has enabled the Opposition to renew their emphasis on the ‘cost of living’ and has led to speculation that, if earnings continue to fall in real terms, the Bank of England will resist pressure to raise interest rates for longer than commentators were expecting earlier in the year.  Jeremy Cook, Chief Economist at currency exchange specialist World First, suggested to the BBC that this weaker than expected wage growth would reduce the weight placed on the strengthening employment data in the Bank of England’s Monetary Policy Committee’s deliberations, making it likely that interest rates would be held at the current level well into 2015.

Unemployment and Employment Rates

According to the latest Labour Force Survey, for the period February to April 2014, the unemployment rate[1] fell 0.6 percentage points on the previous quarter to 6.6% of the economically active population aged 16 and over.  The number unemployed fell by 161,000 on the previous quarter to 2.16 million adults.  The unemployment rate remains higher than the pre-recession rate (which was between 5.1% and 5.6% throughout 2006, 2007, and up to May to July 2008).

The number of people unemployed for over one year has also decreased, by 37,000 on the previous quarter (to a total of 791,000). 

Youth unemployment also fell on the previous quarter, by 1.3 percentage points to 18.5% of economically active 16 to 24 year olds, equivalent to 853,000 individuals. 

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.6 percentage points to 72.9%, which is equivalent to 30.54 million resident adults in employment in the UK (an increase of 345,000 on the previous quarter).   This is the highest number in employment since comparable records began (in 1971), although the rate of employment remains very slightly lower than the comparable pre-recession rate (73% in the three months to May 2008).

Although self-employment accounted for a significant proportion of the total increase in employment on the last quarter, the increase in the number of employees accounted for a larger share - at 265,000 additional employees compared to 73,000 additional self-employed on the previous quarter.  However, the number of self-employed continues to increase at a faster rate than the number employed (at 1.6% compared to 1% on the quarter and 8% compared to 1.8% on the same period a year earlier), although the number of employees accounts for a large majority of total current employment (25.7 million compared to 4.5 million self-employed).

Analysis by the ONS published in February 2014 suggests that a large proportion of the newly self-employed are older (50 plus) and are more likely to be working in low-pay, low skill activities (with taxi drivers and landscape gardeners accounting for large proportions) – rather than owner-managers of small businesses.

Earnings Growth

Between February to April 2014 and the same period a year earlier, total pay (including bonuses) rose by 0.7%, significantly below the rate of general price inflation  (1.8% on the CPI in the 12 months to April 2014).  Regular pay (excluding bonuses) rose by 0.9%.   This was the lowest rate of total pay growth for over twelve months (since 0.6% in January to March 2013).

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in May 2014 fell on the previous month, by 27,400, whilst the rate was down 0.1 percentage points to 3.2% (and down 1.2 percentage points on the same month a year earlier).  This is the twelfth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to April 2014, 120,000 people were made redundant, unchanged from the previous quarter but down 21,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to May 2014 increased by 39,000 on the previous quarter to total 637,000.  The number of ILO unemployed adults to every one vacancy in the three months to April 2014 was 3.4, down 0.5 on the previous quarter.

Key Regional Developments

• Compared to the previous quarter, unemployment rates and levels fell in eight of the nine English regions – only increasing in the North East (by 6,000 individuals and 0.3 percentage points on the previous quarter).
• Unemployment fell most significantly in the South West, by 25,000 individuals and 1 percentage point, to a rate of 4.9% (with only the South East having a lower unemployment rate, at 4.8%).  Unemployment also fell significantly in the East Midlands, London and the West Midlands compared to the previous quarter.
• In the East Midlands, unemployment fell by 22,000 individuals and 1 percentage point, to a rate of 6.1% - below the UK average of 6.6%.  This is equivalent to 142,000 individuals unemployed in the region during the period February to April 2014.
•  Employment increased in the East Midlands, by 39,000 and 1.2 percentage points, to a rate of 73.8% - above the UK average of 72.9%.
• The number and proportion who are economically inactive (neither employed nor unemployed, such as full-time students and carers, early retirees, and ‘discouraged workers’ who have stopped actively seeking work) has fallen in the East Midlands, by 12,000 and 0.4 percentage points – to an economic inactivity rate of 21.4% - below the UK average of 21.8%. 

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[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.

May 2014 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for May.  This draws on Labour Force Survey data for the period January to March 2014 and Jobseekers’ Allowance claimant data for April 2014.

The key employment and unemployment indicators continue to suggest that the UK labour market is recovering.   Unemployment has fallen to 6.8%, the lowest rate since the three months to January 2009 - although this remains significantly higher than the pre-downturn rate of 5.2% maintained through late 2007 and early 2008.  The number employed has increased to 30.4 million, which is the highest level since comparable records began.  However, due to the rate of population growth in the UK, the employment rate (the proportion of the working age population in employment) remains just below the pre-recession rate – although it is now very close, at 72.7% according to the latest estimate compared to 72.8% in the 3 months to July 2008.

However, the latest earnings estimates (excluding bonuses) continue to lag behind the rate of inflation, increasing by 1.3% compared to the same period in 2013 (with inflation on the Consumer Price Index estimated to be 1.6% over the 12 months to March 2014), although the rate of earnings growth with bonuses is just above inflation at 1.7%.  Commentators in the media have reacted to the earnings estimates with disappointment – with the chief economist at currency exchange specialists World First noting that the ‘squeeze’ on UK household incomes has yet to be alleviated.

Reactions to this morning’s employment data have also been relatively cautious, due to the continued strong increase in self-employment, discussed in last month’s NBS briefing.  Both the Guardian and the BBC have noted that rising self-employment has accounted for a significant share of the overall increase in employment, with the Guardian drawing attention to earlier analysis by the ONS on the nature of recent self-employment.  This ONS analysis, published in February 2014, indicated that the majority (84%) of the increase in the self-employed since 2008 were  workers over 50, who were increasingly likely to be working in low-skill, relatively low-pay roles – described by the TUC as rising proportions of ‘odd jobbers’ rather than small business owners, who may be at risk of unstable incomes and poor job security.

The Bank of England also published their quarterly Inflation Report this morning, in which the Governor welcomed the range of positive developments for the UK economy: stronger output growth, falling unemployment, and inflation below the 2% target rate.  However, concerns about a weak recovery in productivity have led the Bank to believe that the UK continues to have sufficient spare capacity such that “there remains scope to make greater inroads into slack before raising the Bank Rate.”  Therefore the Monetary Policy Committee have voted to maintain interest rates at 0.5%, and any future rise in interest rates will begin gradually and only after improvements in productivity and labour utilisation (both in terms of unemployment and hours worked)  - which continue to be significantly below pre-crisis levels, despite the increasing evidence of strengthening recovery. 

Unemployment and Employment Rates

According to the latest Labour Force Survey, for the period January to March 2014, the unemployment rate[1] fell 0.4 percentage points on the previous quarter to 6.8% of the economically active population aged 16 and over.  The number unemployed fell by 133,000 on the previous quarter to 2.21 million adults.

The number of people unemployed for over one year has also decreased, by 32,000 on the previous quarter (to a total of 813,000). 

Youth unemployment also fell on the previous quarter, by 1 percentage point to 19% of economically active 16 to 24 year olds, equivalent to 868,000 individuals.

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.6 percentage points to 72.7%, which is equivalent to 30.43 million resident adults in employment in the UK (an increase of 283,000 on the previous quarter).   This is the highest number in employment since comparable records began (in 1971), although the rate of employment remains slightly lower than the pre-recession rate (72.8% in the 3 months to July 2008).

A further significant rise in self-employment accounted for a large proportion of the total increase in employment.  The number of employees increased by 351,000 (to reach 25.63 million) and the number of self-employees increased by 375,000 (to reach 4.55 million).  Therefore, although self-employees continue to account for a minority of the total employed workforce, increases in self-employment has accounted for the majority of the increase in total employment for several successive quarters.  Analysis by the ONS published in February 2014 suggests that a large proportion of the newly self-employed are older (50 plus) and are more likely to be working in low-pay, low skill activities (with taxi drivers and landscape gardeners accounting for large proportions) – rather than owner-managers of small businesses.

Earnings Growth

Between January to March 2014 and the same period a year earlier, total pay (including bonuses) rose by 1.7%, just above the rate of inflation (1.6% on the CPI in the 12 months to March).  

However, regular pay (excluding bonuses) rose by 1.3%.   This is up by 0.1 percentage points on the previous quarter and 0.5 percentage points on the rate of regular pay growth a year earlier – but still remains lower than the rate of inflation. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in April 2014 fell on the previous month, by 25,100, whilst the rate was down 0.1 percentage points to 3.3% (and down 1.2 percentage points on the same month a year earlier).  This is the eleventh consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to March 2014, 126,000 people were made redundant, up 15,000 from the previous quarter but down 14,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to April 2014 increased by 45,000 on the previous quarter to total 628,000.  The number of ILO unemployed adults to every one vacancy in the three months to March 2014 was 3.6, down 0.5 on the previous quarter.

Key Regional Developments

• Compared to the previous quarter, unemployment rates and levels fell in eight of the nine English regions – only increasing in the North East (by 5,000 individuals and 0.1 percentage points on the previous quarter).
• Unemployment fell most significantly in the South West, by 41,000 and 1.6 percentage points on the previous quarter -   to the lowest unemployment rate of the nine regions in January to March 2014, at 4.9%.   The North West, Yorkshire and the Humber, the West Midlands and London all also experienced significant falls in unemployment.
• In the East Midlands, unemployment fell by 6,000 individuals and 0.3 percentage points, to a rate of 6.6% - below the UK average of 6.8%.  This is equivalent to 155,000 individuals unemployed in the region during the period January to March 2014.
• Employment increased in the East Midlands, by 15,000 individuals and 0.5 percentage points, to a rate of 73% - above the UK average of 72.8%.  The number and proportion who are economically inactive (neither employed nor unemployed, such as full-time students and carers, early retirees, and ‘discouraged workers’ who have stopped actively seeking work) has fallen in the East Midlands, by 7,000 and 0.2 percentage points – to an economic inactivity rate of 21.6% - below the UK average of 21.8%.  These small differences between the East Midlands and the relevant national averages are unlikely to be statistically significant, so it is more accurate to state that the region is currently broadly in line with the UK average on these key labour market indicators.

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[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. 

April 2014 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for April.  This draws on Labour Force Survey data for the period December 2013 to February 2014 and Jobseekers’ Allowance claimant data for March 2014.

There have been expectations that this morning’s LMS would indicate that pay levels are increasing at a greater rate than general price inflation for the first time in almost five years.  Yesterday it was announced that inflation had fallen to 1.6% on the Consumer Price Index for the 12 months to March 2014 (down from 1.7% for February).  This is the sixth consecutive monthly fall and the third month in which inflation was below the Bank of England’s 2% target rate.  A survey of economists undertaken on behalf of Reuters predicted that pay growth would exceed inflation, with an average prediction of 1.8%.   Some of this morning’s headlines projected an end to ‘the cost of living crisis’, and an associated “blow to Labour’s economic strategy”.

The latest estimates do not quite indicate wage growth outstripping inflation.   Total pay, which includes bonuses, did increase by 1.7% in the three months to February 2014 compared to the same quarter a year earlier, but ‘regular pay’, which excludes bonuses, increased by 1.4% - which remains slightly lower than the current estimate of inflation on the CPI.  This does indicate a significant increase on previous estimates of earnings growth, and is the highest rate of regular pay growth since the three months to February 2012.  However, on the basis of a single monthly estimate, it is premature to suggest that the squeeze on household income affecting the UK since the onset of recession in 2008 has come to an end.    During this period, there has been a sustained and significant decline in earnings in real terms.  Therefore it will be some time before there is a noticeable improvement, although the latest estimates could indicate a beginning of a recovery in living standards.

Other key labour market indicators in today’s release also indicate continued improvements.  The unemployment rate fell by 0.2 percentage points on the previous quarter to 6.9%.  This is below the 7% level  originally  identified by the Governor of the Bank of England in summer 2013 as a threshold at which point the Monetary Policy Committee may consider increasing interest rates.  This forward guidance has since been revised to include a broader set of measures of economic performance.   However, the rate of unemployment remains higher than the pre-downturn level of 5.2% that was maintained through late 2007 and early 2008.

Conversely, the rate and number employed has increased, although the increase in the number of employees continues to be outstripped by the number entering self-employment, raising continued concerns about ‘necessity entrepreneurship’ – individuals becoming self-employed because they have been unable to secure paid employment.  In analysis published on Monday, the TUC estimated that 44% of the net increase in the numbers employed  since 2010 has been due to self-employment, 40% of which are working part-time.   The authors of this analysis fear that it indicates an increasing number of ‘odd jobbers’ who may become locked in a cycle of low pay, low skill work with unreliable hours and limited protection (sick pay, holiday pay, etc.).

Unemployment and Employment Rates

According to the latest Labour Force Survey, for the period December 2013 to February 2014, the unemployment rate[1] fell by 0.2 percentage points on the previous quarter to 6.9% of the economically active population aged 16 and over.  The number unemployed fell by 77,000 on the previous quarter, to a total of 2.24 million adults.

The number of people unemployed for over one year has also decreased, by  32,000 on the previous quarter (to a total of 807,000). 

Youth unemployment also fell on the previous quarter, by 0.9 percentage points to 19.1% of economically active 16 to 24 year olds, equivalent to 881,000 individuals.

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.4 percentage points to 72.6%, which Is equivalent to 30.39 million resident adults in employment in the UK (an increase of 239,000 on the previous quarter).

A further significant increase in self-employment accounted for a large proportion of this total increase.  The number of employees increased by 99,000 (to 25.6 million) whilst the number self-employed increased by 146,000 on the previous quarter (to reach 4.5 million).  TUC analysis of LFS data since 2010 notes that increasing levels of self-employment have been observed through much of the period, and raise concerns around the nature of new self-employment.    Their analysis suggests that:

• Over the period April to June 2010 to November to January 2013, the number of employees has increased by a total of 656,000 (a 2.6% increase over the period) whilst the number self-employed has increased by 540,000 (a 13.8% increase).  Self-employment has therefore accounted for 44% of the total increase in the numbers of adults in employment since mid-2010; 
• Within the increase in self-employment, the number of those working part-time has increased by 22.3% (compared to a 10.8% increase in the number of self-employed working full-time);
• Older workers (50+) have made up 50% of the overall increase in self-employment; and
• Those working as Sub-contractors and Freelancers have increased by the largest amount, followed by those Working for Themselves -  with the number of self-employed working as Partners Running a Business decreasing very significantly.

Separate research by the Resolution Foundation found that the median earnings of the self-employed fell significantly following the onset of recession, to a median annual salary of £12,000 in 2010  – which is close to the minimum wage.  Together these developments suggest that, rather than a significant increase in people starting new companies as Ministers have suggested, recovery in the labour market remains fragile with many people moving into casualised, relatively insecure, low pay/low hours self-employment. 

Earnings Growth

Estimates of earnings  growth in the latest LMS do show a significant increase compared to previous quarters, although it is not quite true to say that earnings growth has unequivocally exceeded the rate of general price inflation (1.6% on the CPI in the 12 months to March).   Between the periods December 2012 to February 2014 and December 2013 to February 2014, total pay (including bonuses) rose by 1.7%, just above the rate of inflation. 

However, regular pay (excluding bonuses) rose by 1.4%.   This is the highest rate of growth in regular pay since the period December 2011 to February 2012 (which was 1.6%) and is up by 0.2 percentage points on the previous quarter – but still remains slightly lower than the rate of inflation. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in March 2014 fell on the previous month, by 30,400, whilst the rate was down 0.1 percentage points to 3.4% (and down 1.2 percentage points on the same month a year earlier).  This is the tenth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to February 2014, 117,000 people were made redundant, up 5,000 from the previous quarter but down 20,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to March 2014 increased by 38,000 on the previous quarter to total 611,000.  The number of ILO unemployed adults to every one vacancy in the three months to February 2014 was 3.8, down 0.3 percentage points on the previous quarter.

Key Regional Developments

Unfortunately earnings estimates are only published at UK national level in the monthly LMS, so it is not possible to comment on sub-national variations in earnings growth rates.  This will be possible when the 2014 Annual Survey of Hours and Earnings is published in November.

• Compared to the previous quarter, unemployment rates and levels fell in six English regions, but increased in Yorkshire and the Humber, the East Midlands and the West Midlands. 
• Unemployment increased most significantly in the East Midlands, by 14,000 on the previous quarter, to a total of 163,000 adults aged 16 and over who are unemployed in the region.  The unemployment rate increased by 0.6 percentage points to 7% - which is slightly higher than the national average.
• Employment in the East Midlands fell, by 12,000 individuals, resulting in a slight fall of 0.1 percentage point in the employment rate, to 72.4% (slightly lower than the national average).  Unemployment increased by a greater amount than the corresponding fall in employment because of a fall in economic inactivity (people who are neither employed or unemployed – i.e. not able to work or actively seeking work).  Therefore, compared to the previous quarter, a significant number of individuals in the East Midlands are likely to have moved from economic inactivity to unemployment (able to work and actively seeking work).
•  The most significant falls in unemployment were in the South West, where the numbers unemployed fell by 51,000 (whilst the rate decreased by 1.9 percentage points) and the North East, where the numbers fell by 10,000 (and the rate by 0.9 percentage points).   However, the North East continues to have the highest rate of unemployment of the nine English regions, at 9.3%.

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[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.

March 2014 Labour Market Statistics Briefing

This morning, prior to the Chancellor of the Exchequer’s 2014 Budget speech, the Office for National Statistics published the Labour Market Statistics (LMS) release for March.  The Government, the Opposition and commentators in the media will pay particular attention to both the employment trends and earnings estimates, indicating the extent of wider recovery in the labour market but also whether the ‘cost of living crisis’ (the Opposition’s term for the sustained period of sub-inflation earnings growth) is likely to significantly improve prior to the General Election in spring 2015.  The Government, including the Prime Minister, have already greeted this morning’s data as a sign that their ‘long term economic plan’ is working, whilst the Opposition continue to draw attention to the earnings element of the ONS release.

The latest LMS summarises Labour Force Survey (LFS) data for the period November 2013 to January 2014, and Jobseeker’s Allowance (JSA) claimant data for February 2014.  Following confusion in the media over last month’s release, the ONS have clarified their guidance that the employment and unemployment rates from the latest 3 month period published in each successive monthly LMS should only be compared to the previous non-overlapping 3 months included in the same LMS publication, rather than the rate published in the previous LMS release (which will include 2 months’ overlapping data).  This additional clarification is important as the latest unemployment rate has fallen to 7.2% on the previous non-overlapping quarter (7.4% in August to October 2013) but is level with the rate published in February’s LMS (for the period October to December 2013).  Although the ONS clearly state that unemployment has fallen on the previous non-overlapping quarter, and that last month’s published rate is not directly comparable “as the labour Force Survey is not designed to measure monthly changes”, City commentators quoted in this morning’s news continue to make this comparison - somewhat inaccurately suggesting that unemployment has “held steady” at 7.2%.

Alongside the fall in unemployment, both the number employed and the employment rate have increased - although the ONS report that this was driven entirely by a significant increase in the number self-employed, with a fall in the number of employees.  This raises concern around the sustainability of recovery beneath these headline figures, with earlier analysis by the ONS and the TUC suggesting that recent increases in self-employment may indicate ‘necessity entrepreneurship’.  This describes individuals potentially ‘trading down’ on their skills, indicated by the higher proportions of recently self-employed individuals in lower skill occupations compared to those who became self-employed prior to the onset of recession in 2008.

Finally, earnings data in the latest LMS indicates an increase in annual earnings growth compared to previous periods, with regular pay (excluding bonuses) increasing by 1.3% on the previous 12 months.  This remains lower than the current rate of inflation (1.9% on the Consumer Prices Index) – but the gap between earnings growth and inflation has narrowed.  However, there is a significant gap between public and private sector pay, with regular pay for individuals working in the private sector increasing by 1.6% over the year, compared to only 0.6% for those working in the public sector.

Unemployment and Employment Rates

According to the latest Labour Force Survey data (for November 2013 to January 2014), the unemployment rate[1] fell by 0.2 percentage points on the previous quarter, to 7.2% of the economically active population aged 16 and over.  The number unemployed fell by 63,000 on the previous quarter  (August to October 2013).  The total number of adults who are estimated to be unemployed is 2.33 million.

The number of people unemployed for over one year has also decreased, by  38,000 on the previous quarter (to a total of 828,000). 

Youth unemployment also fell on the previous quarter, by 0.7 percentage points to 19.8% of economically active 16 to 24 year olds, equivalent to 912,000 individuals.

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.3 percentage points to 72.3%, equivalent to 30.19 million resident adults in employment in the UK (an increase of 105,000 on the previous quarter).

This increase was entirely driven by self-employment.  The number of employees fell by 60,000 (to 25.5 million) whilst the number of self-employed individuals increased very significantly on the previous quarter, by 211,000 (to reach 4.5 million).

Earnings Estimates

Earnings growth remains below the rate of general price inflation, although the gap has narrowed compared to previous periods.  Between the periods November 2012 to January 2013 and November 2013 to January 2014, total pay (including bonuses) rose by 1.4% and regular pay (excluding bonuses) by 1.3%.  General price inflation on the Consumer Prices Index is currently 1.9%.

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in February 2014 fell on the previous month, by 34,600, whilst the rate was down 0.1 percentage points to 3.5% (and down 1.1 percentage points on the same month a year earlier).  This is the ninth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to January 2014, 117,000 people were made redundant, down 2,000 from the previous quarter and down 15,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to February 2014 increased by 23,000 on the previous quarter to total 588,000.  The number of ILO unemployed adults to every one vacancy in the three months to January 2014 was 4.0, down 0.3 percentage points on the previous quarter.

Key Regional Developments

• Compared to the previous quarter, unemployment rates and levels fell in five English regions, but increased in the North West, the East Midlands and the East of England.  In Yorkshire and the Humber, the number unemployed increased slightly, but the unemployment rate remained stable compared to the previous quarter, at 8.7%.
• The most significant falls in unemployment were in the South East and the West Midlands, where the numbers unemployed fell by 24,000 and 19,000 respectively, and the unemployment rates fell by 0.6 percentage points in both cases.  The lowest unemployment rate of the nine regions was in the South East, at 5.2%.
• The North East continues to have the highest rate of unemployment of the nine regions, at 9.5%, although this fell by 0.6 percentage points on the previous quarter.  The largest increase in unemployment was experienced in the North West, where 22,000 additional individuals were estimated to be unemployed compared to the previous quarter, with the rate increasing by 0.6 percentage points to 8.1%.
• In the East Midlands, the unemployment rate was 7%, up 0.1 percentage points on the previous quarter, although this remains slightly lower than the average for the UK (7.2%).  This is equivalent to 164,000 individuals unemployed according to the ILO definition, up 2,000 on the previous quarter.  The employment rate fell slightly, by 0.1 percentage points to 72.6% - above the average for the UK (72.3%).

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[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.

February 2014 Labour Market Statistics Briefing

This morning, the Office for National Statistics published the Labour Market Statistics (LMS) release for February 2014.  This summarised Labour Force Survey (LFS) data for the final three months of 2013 and Jobseeker’s Allowance (JSA) claimant data for January 2014.  This release indicates further improvements in the headline labour market indicators.  The exception continues to be earnings growth, which remains weak and well below the rate of inflation, despite the Consumer Price Index measure of inflation falling to 1.9% in January, below the Bank of England’s target rate of 2% for the first time in four years. 

Additionally, the latest data suggests continuing issues of under-employment, with relatively high proportions of people stating that they are working temporarily or part-time because they cannot find permanent or full-time work.  Such concerns underpin the Bank of England’s revised Forward Guidance announced with the Inflation Report last week.

The employment rate and number employed increased compared to the previous quarter, whilst the unemployment rate fell compared to the previous quarter, to 7.2%.  There has been some misunderstanding of this in the press, with newspapers reporting an increase in unemployment when compared to the rate published in January’s LMS (7.1%).    The ONS recommend against comparing successive monthly LFS-based estimates due to the data overlap.  For example, the data published last month covered the period September to November, the data this month covers the period October to December.  In each of this periods, the unemployment rate fell compared to the previous non-overlapping quarter (e.g. June to August and July to September respectively).  On this basis, according to the latest release, the unemployment rate fell by 0.4 percentage points between the period July to September and October to December 2013.

The number and rate of unemployment-benefit claimants has fallen on the previous month.  The JSA claimant rate has now fallen every month since May 2013.  However, welfare reform has dominated the news over the last few days, especially following the live televised debate on welfare on Channel 4 on Monday that coincided with the final episode of the controversial ‘Benefits Street’ reality TV show and interventions from the leader of the Roman Catholic Church in England, the archbishop of Westminster Vincent Nichols.

During the televised debate, commentators on the left, such as author and columnist Owen Jones and Huffington Post political editor Mehdi Hasan, highlighted the relatively large share of the welfare budget attributed to people in work but on low incomes.  They identified low pay and/or part-time or zero hours employment alongside rapid rises in private rents as areas that required urgent attention from the Government.  Although not directly disputing the share of the total welfare bill paid to those in work, those on the right, including columnist Allison Pearson and DWP Minister Mike Penning, strongly advocated the view that work was the best way out of poverty and that incentivising benefit claimants into work would significantly reduce the welfare bill (as well as furthering a ‘moral mission’, according to David Cameron in an article in the Telegraph today).

This morning, the DWP published their quarterly statistical summary of key benefit payments, which enables some exploration of these arguments.  In August 2013, there were 5.4 million working-age claimants accessing either out-of-work benefits or in-work income support. The largest proportion claimed Employment and Support Allowance (which replaced Incapacity Benefits and the Severe Disablement Allowance in 2008), accounting for 45% of total working-age claimants (2.4 million).   JSA claimants accounted for 23% of the total (1.3 million claimants).  The remainder, 1.7 million, received benefits that could be claimed by those in work, such as lone parent or carers’ support, other Income Support, and Disability Living Allowance.  

However, these figures do not include Housing Benefits.  These are paid via Local Authorities to those on low income (whether working or out-of-work) to cover part or all of ‘reasonable’ weekly rents for their area,  and reported  by the DWP separately.  Of the 5 million Housing Benefit claimants, 3.7 million were working-age.  Of these, over a million Housing Benefit claimants were in employment and not on other ‘passported benefits’ (benefits that individuals eligible for other means-tested benefits, such as JSA, may also be entitled to, such as Income Support).  When looking specifically at new Housing Benefit claims registered since 2010 -  the vast majority of new claimants (over 90%) were in work.

So in summary, the Government are right to highlight the high proportion of working-age benefit claims because of illness or disability, but JSA accounts for a relatively small proportion of total working-age claimants (less than a quarter).  This total does not include Housing Benefits – where almost a third of working-age claimants were employed.  A final point to add is that, by focussing on working-age claimants, this analysis explicitly excludes state pensions which, according to the DWP’s annual report, accounted for 49% of the total national welfare budget (excluding administration costs), with Housing Benefit the next largest share, at 11%.  JSA claimants counted for only 0.4% of the total welfare budget in the 2012-13 financial year.

Unemployment and Employment Rates

According to the latest Labour Force Survey data (for October to December 2013), the unemployment rate[1] fell by 0.4 percentage points on the previous quarter, to 7.2% of the economically active population aged 16 and over.  The number unemployed fell by 125,000 on the previous quarter  (July to September 2013).  The total number of adults who are estimated to be unemployed is 2.34 million.

The number of people unemployed for over one year has also decreased, by  45,000 on the previous quarter (to a total of 845,000). 

The employment rate (for adults aged 16-64) increased on the previous quarter, by 0.3 percentage points to 72.1%, equivalent to 30.15 million resident adults in employment in the UK (an increase of 193,000 on the previous quarter).  Within this increase, the number of self-employed people increased strongly (by 172,000).  Previous analysis, that shows an increasing proportion of self-employed in lower-skill occupations since the onset of recession, suggests that this trend could be a cause for concern.  A significant number of these individuals could be ‘necessity entrepreneurs’, entering self-employment having failed to secure a job, and being vulnerable to low pay, casualised and low hours work.

Earnings Estimates

Earnings growth remains weak and below the rate of general price inflation, despite a fall in the CPI rate to 1.9% in the 12 months to January 2014 (below the Bank of England’s 2% inflation target for the first time since November 2009).  Total pay (including bonuses) rose by 1.1% and regular pay (excluding bonuses) by 1% between the periods October to December 2012 and October to December 2013. 

Job Seekers’ Allowance Claimants

The number of Jobseekers’ Allowance (JSA) claimants in January 2014 fell on the previous month, by 27,600, whilst the rate was down 0.1 percentage points to 3.6% (and down 1 percentage point on the same month a year earlier).  This is the eighth consecutive month in which the rate of claimant count unemployment has fallen. 

Redundancies and Vacancies

In the three months to December 2013, 111,000 people were made redundant, down 13,000 from the previous quarter and down 34,000 from the same period a year earlier.

The number of vacancies (advertised through Jobcentre Plus) in the three months to January 2014 increased by 28,000 on the previous quarter to total 580,000.  The number of ILO unemployed adults to every one vacancy in the three months to December 2013 was 4.1, down 0.4 percentage points on the previous quarter.

Key Regional Developments

• Compared to the previous quarter, unemployment rates and levels fell in all English regions except for the South West.  The most significant falls were in the West Midlands and the South East, where the numbers unemployed fell by 31,000 and 37,000 respectively whilst the rates fell by 1.2 and 0.8 percentage points.
• The North East continues to have the highest rate of unemployment of the nine regions, at 10%, although this fell by 0.2 percentage points on the previous quarter.  In the South West, the unemployment rate increased by 0.1  percentage points to 6.5%.
• In the East Midlands, the unemployment rate was 6.9%, equivalent to 162,000 individuals unemployed according to the ILO definition, compared to 7.2% in the UK.   Compared to the previous quarter, unemployment in the East Midlands fell by 0.2 percentage points and 4,000.  Employment increased slightly, by 7,000 individuals and 0.1 percentage points to a rate of 72.6%, above the UK average of 72.1%

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[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.