Wednesday, 14 June 2017

UK pay squeeze starting to feel more like a bite

We knew the UK was entering another prolonged period of falling real wages but the latest official Jobs Report from the Office for National Statistics suggests the squeeze is starting to feel more like a bite. The growth rate of average weekly earnings excluding bonuses slowed to just 1.7% in cash terms in April and fell by 0.6% when adjusted for the corresponding rate of consumer price inflation. The nominal and real figures including bonuses were 2.1% and -0.4% respectively.

What’s remarkable is that pay growth, however measured, is so weak at a time when employment is at joint record rate of 74.8%, unemployment at a 42 year low of 4.6%, and the working age inactivity rate down to 26.5%. 

Moreover the rise in employment in the latest quarter is driven almost entirely by relatively strong growth in full-time jobs for employees on permanent contracts. This, on the face of things, doesn't look like a surge in the so-called gig economy. The total rise of 109,000 in the number of people in work in the three months to April comprised a rise of 196,000 employees working full-time, a fall of 69,000 employees working part-time, a fall of 24,000 full-time self-employed and a rise of 26,000 part-time self-employed. The number of temporary employees fell by 17,000 and the number of part-time workers unable to find a full time job fell by 39,000. All the net employment growth in the first quarter was in the private sector.

However, despite the overall very positive news on jobs the weak and weakening pay figures are the key take-away from today's ONS report. Hard times for people in work and near full employment make strange bedfellows, highlighting the extent to which a de-regulated labour market with an abundance of workers available to fill low wage vacancies has altered the UK jobs landscape.        


Wednesday, 17 May 2017

Underlying pay growth slows and average real weekly earnings fall as productivity takes a hit despite 42 year low in UK unemployment rate

The UK Office for National Statistics (ONS) has just released its latest monthly jobs report, including data mostly covering the three months to March 2017. This is the last set of official labour market figures to be published before the General Election scheduled  for 8 June.    

Employment is up again by 122,000 (all full time jobs, mostly for employees) to a new record rate of 74.8% while unemployment is down 53,000 to a 42 year low of 4.6%, with job vacancies also at a record level. Yet with labour productivity estimated to have fallen by 0.5% in the first quarter of the year the underlying rate of growth in average weekly earnings (i.e excluding bonuses) has dipped to 2.1%, a real terms fall of 0.2% when adjusted for the corresponding rate of consumer price inflation. 

This is a jobs market that looks better on paper than it feels in the pocket, reflecting a structural shift in the types of work people do and the relative bargaining power between workers and bosses. No wonder workers’ rights, productivity and pay rather than the availability of jobs per se, is a key battleground in the UK General Election campaign.         

Wednesday, 12 April 2017

How low can the UK jobless rate safely go?


According to the latest official data (mostly covering the three months to February 2017) just released by the Office for National Statistics, the UK labour market continues to enjoy a robust sustainable expansion.  

There were 39,000 more people in work (mostly full-time) in the latest quarter plus a record number of job vacancies (767,000), 45,000 fewer unemployed and 10,000 fewer economically inactive alongside an easing in pay pressure. 

A joint record employment rate of 74.6%, an unemployment rate at a 42-year low of 4.7% and almost zero (0.1%) growth in real average weekly earnings illustrates a remarkable structural change in the operation of the UK labour market compared with earlier decades. 

This particular combination of jobs and pay suggests that the unemployment rate could fall much further, perhaps below 4%, without triggering troublesome pay inflation. While the effect of Brexit uncertainty on the demand side of the economy might yet result in a temporary rise in unemployment later this year, full employment is thus now a more realistic prospect for the UK than at any time since the early 1970s.’        

Wednesday, 15 February 2017

UK jobs market stablises but no sign yet that Brexit means EU worker exit

It's UK jobs report day once again. This month's labour market data release from the Office for National Statistics (ONS) mostly covers the three months to December (i.e. Q4) 2016 

The UK labour market stabilized in the final quarter with little overall activity on the jobs front combined with slightly weaker growth in productivity and pay. 

The total number of people in work increased by 37,000 to 31.837 million (yet another record employment rate of 74.6%). But there was no increase in the number of employees - the smallish rise in employment consists of more self-employed people (up 13,000), more unpaid family workers (up 4,000) and more people on government supported schemes (up 21,000). The level of job vacancies meanwhile was broadly flat (at around 750,000) while the unemployment rate held steady at 4.8%. 

The ONS commentary suggests the labour market is now edging toward full capacity. But if by this they mean the market is now quite tight this still isn't showing up in the pay figures. Growth in output per hour worked (aka labour productivity) dipped to 0.3%, down from 0.4% in the third quarter, and together with stable unemployment this led to a slight fall in the rate of growth of average weekly earnings to 2.6%. With consumer price inflation picking-up, UK workers are thus beginning to face another bout of downward pressure on real pay, which may depress overall economic growth in the course of 2017.   

However, there is little sign that the labour market is yet being affected by an exodus of EU born workers following the EU referendum result. Given seasonal factors the number of EU born people working in the UK was more or less flat at around 2.3 million in the second half of last year, and in the final quarter of 2016 was 188,000 higher than in the corresponding quarter of 2015. While this may suggest the UK is no longer the draw it once was for EU migrants, Brexit has yet to trigger a big EU labour exit.’ 

Wednesday, 18 January 2017

Precarious workforce bears the brunt of UK jobs slowdown

It's possible that you might read positive things about the latest Jobs Report from the UK's Office for National Statistics, mostly covering the three months September to November 2016, which was published earlier today. If so, here is a cautionary note: 

The UK labour market showed clear signs of a modest slowdown toward the end of 2016 with the precarious workforce of temps, part-time employees and full-time self-employed bearing the brunt as businesses responded to economic uncertainty following the Brexit vote. The total number of people in work fell by 9,000 in the three months to November but this includes much bigger falls in the number of full-time self-employed (down 49,000), part-time employees (down 60,000) and temps (down 35,000). Although part-time self-employment increased (up 31,000) this is likely to be due to more under-employment among the self-employed unable to find enough hours of work. Only a sharp rise of 143,000 in the number of economically inactive people prevents the weaker jobs numbers from showing up as higher unemployment, the number of jobless people actively seeking work in fact falling by 52,000. Don’t be fooled, therefore, by apparently good headline news of falling unemployment and higher nominal wage growth (up to 2.7% excluding bonuses), the jobs market is at present slowing not growing, as those in precarious work know only too well.