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.
[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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