Another month, another set of mixed official figures on the UK labour market. Those who know me are aware of how desperate I am to see a return full employment. But unlike commentators with a political or commercial vested interest in talking things up, my approach is always to make a fair assessment of the state of play. And it’s not as good as some want us to think.
I have already commented publicly today on how our ‘jobs without growth’ economy is a sign of economic weakness, sustained only by falling productivity and a severe squeeze on real pay levels, not success. This can’t go on forever, and evidence of a sharp jump in redundancies at the end of 2012 – well before the current spate of job cuts announced this month – could spell the beginning of the end. But what really bugs me is constant talk of the UK’s ‘record number of people in work’. This bald statistical statement conveniently glosses over the fact that the true measure of a country’s employment performance is its employment rate, the proportion of people in work, which takes account of population.
The UK employment rate fell sharply between 2008 and 2010, stabilized between 2010 and 2011 but despite subsequent improvement remains 1.7 percentage points below the pre-2008 recession peak of 60.3%. Without any further rise in population, the total number of people in work would have to increase by more than 900,000 for the employment rate to return to the 2008 peak. However, on current official population projections a return to the 2008 peak employment rate will require a net increase in employment of 2.2 million in order to offset the effect of population growth.
Adjusting for the projection of the Office for Budget Responsibility (OBR) that public sector employment will fall by a further 600,000 between the start of 2013 and the start of 2018 the estimated number of jobs needed to restore the 2008 employment rate implies a required net increase in private sector employment of 2.8 million. With a normal pace of employment growth this is unlikely to be achieved before 2020 even if the economy avoids further shocks before the end of the decade. Record employment? Not really.