Wednesday, 21 January 2015

Overall pace of UK labour market recovery slows but vacancies reach new record level, giving a further lift to real wages, while rise in number of people economically inactive helps lower jobless rate to 5.8% despite worrying increase in youth unemployment

The Office for National Statistics (ONS) has this morning released the latest set of UK labour market data, mostly covering the three months September to November 2014.

These latest figures paint a mixed picture of the state of the UK labour market toward the end of last year. There was a clear slowing in the overall pace of job creation – the quarterly increase of 37,000 (to 30.80 million) being the smallest since spring 2013, leaving the UK employment rate unchanged at 73.0%. Similarly the quarterly fall of 58,000 in the number of people unemployed (to 1.91 million) is the smallest since late summer 2013. However, despite this slower pace of recovery a sharp quarterly increase of 66,000 in the number of people of working age who are economically inactive – i.e. outside the labour market – helped lower the unemployment rate to a six year low of 5.8%.

Full-time employees account for the entire quarterly net increase in employment, the number of people self-employed and/or working part-time having fallen slightly. There was also a fall in the number of temporary employees while the number of people working part-time because unable to find a full-time job remains on the recent downward trend to stand at 1.32 million. The level of long-term unemployment has fallen again (down 53,000 to 658,000) though youth unemployment (16-24 year olds unemployed and actively seeking work) is up 30,000 to 764,000, the number of 16-24 year olds in work dropping by 84,000.    

The most encouraging news in the latest quarterly figures is a rise of 19,000 in the number of job vacancies to a new record level of 700,000. This indicates a modest ongoing tightening of conditions in the labour market which underpins a continued increase in pay growth and a further improvement in real weekly earnings, with regular weekly pay growth of 1.8% far outstripping the CPI rate of price inflation.

As for what these figures suggest for the labour market in 2015, the message is broadly in line with expectations at the start of the year – continued improvement but at a slower pace than in the past two years and with no sign of a worrying rise in pay pressure even though low price inflation is helping to boost real wages. However, the apparent quarterly deterioration in the position of young people in the labour market is of concern and if it continues may well feature as an important issue in pre General Election campaigning.          

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