Wednesday 14 May 2014

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.




[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. 

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