As I write it’s just a little over an hour until the Chancellor, George Osborne, delivers his fourth budget statement to Parliament. He might have chosen a better day. For months now each set of official labour market figures from the Office for National Statistics (ONS) have shown falling unemployment. This morning, however, the news was less good – unemployment up by 7,000 in the three months to January.
The latest headline rise in unemployment is disappointing though primarily due to a flood of women into the labour market at the turn of the year rather than weak employment growth (see headline figures below). On the contrary, the number of people in work again rose sharply, with a big rise in full-time employees more than offsetting a fall in part-time employment and self-employment. Private sector job creation continues to rise at a remarkable pace, while the loss of public sector jobs has slowed from around 30,000 a quarter to 20,000 a quarter. Overall, job vacancies are up very slightly, redundancies down and encouragingly long-term unemployment down. However, it’s clear that people are experiencing real pay cuts to price themselves into work, the rate of growth in weekly earnings slowing yet again from 1.3% to 1.2% at a time when price inflation is on the rise.
The big worry in these latest figures is what appears to be a more fundamental renewed deterioration in youth unemployment. Employment has fallen for 16-24 year olds while unemployment has risen sharply, with the core group of young people not in full-time education, who had a relatively good 2012, now being hit hard once again despite a significant amount of government support being targeted at them.
But we should be careful not to go overboard on the doom and gloom. With the UK economy at risk of a triple dip recession, almost 7,000 public sector jobs being shed each month and 2.52 million people unemployed it might seem odd to suggest that we’ve just been through a jobs boom. Yet believe it or not 2012 was the best year for employment growth since 2000 and surpassed by only nine other years in the previous four decades. What makes the 2012 jobs boom truly extraordinary is that all the other jobs booms since the 1970s occurred during periods of economic boom, with GDP growing well above the underlying trend rate, rather than stagnation.
The 2012 jobs boom can’t be explained solely by more people working short-hours. Full-time employees account for half the total increase in employment. Only in two years since the early 1970s has the volume of work undertaken in the UK economy as measured by total weekly hours worked increased at a faster annual rate than in 2012.
A jobs boom without economic growth is unprecedented in recent UK economic history. The downside of course is a fall in labour productivity and a continued real pay squeeze. This might justifiably be deemed a price worth paying for more jobs. But a jobs boom that doesn’t deliver improved living standards is like nothing we’ve seen before in the UK and not necessarily a signal that the economy is heading in the right direction. The extraordinary jobs boom may console the Chancellor but doesn’t lessen the onus on him to deliver a Budget for growth later today.
Latest Quarterly (November-January) Labour market headlines from ONS stats
Number of people in work up 131,000 (of which 111,000 women)
Number unemployed up 7,000
Number of people in labour market up 137,000 (of which 116,000 women)
Number unemployed and claiming Jobseekers Allowance down 1,500
Number 16-24s in work down 30,000
Number 16-24s unemployed up 48,000
Number long-term unemployed down 16,000
Private sector employment up 151,000
Public sector employment down 20,000 (mostly due to education)
Full-time employment up 195,000
Part-time employment down 64,000
Part-time who want full time job down 6,000
Employees up 170,000
Self-Employment down 21,000
Temp employees up 18,000
Temp employees who want permanent job up 8,000
Vacancies up 2,000
Redundancies down 14,000
Regions: unemployment up in North East, North West, Yorks and
Humber, West Midlands, South East, Wales and Northern Ireland
Growth in total pay (including bonuses) down from 1.3% to 1.2%
Growth in regular pay down from 1.3% to 1.2%