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%.
[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.
