A fragile jobs recovery – not the time for nasty shocks
The latest monthly jobs figures confirm the picture of a cyclical employment recovery that has been strong in some respects but shows worrying signs of running out of pzazz. The last thing we need right now is a vote for years of uncertainty putting a crimp on demand.
Unions should certainly welcome the continuing improvements in employment and unemployment. The latest figures (for February to April) show the highest employment level (31,594,000) and rate (74.2 per cent) since records began in 1971. The unemployment level (1,671,000) is the lowest since 2008 and the unemployment rate (5.0 per cent) is the lowest since 2005. For the second month running, average weekly earnings (total pay) topped the £500 a week mark and the number of unemployed people per job vacancy remained at 2.2, the lowest since 2005.
But there are still good reasons for worrying that the run of good news may be about to come to an end.
Firstly, take the employment and unemployment rates:
This chart shows the rise or fall in employment and unemployment rates for the same quarter 12 months earlier. Both are still improving, but they’re also slowing down. The figures for actual weekly hours worked (which allow us to take account of shifts between part-time and full-time jobs) give the same impression, and have hardly grown for five months:
And then look at the quality of the jobs being created:
While self-employment growth is accelerating again, growth in employee jobs has been slowing down since the end of last year. And it is much the same story if we look at part and full-time working:
The loss of manufacturing jobs – which tend to be higher paid and with higher productivity – is especially worrying. Between March 2008 and March 2016 the number of service sector jobs grew by 2,000,000. During the same period, the number of manufacturing jobs fell by 228,000. Manufacturing workers were especially hard hit by the recession but, until a year ago, there was a well established employment recovery. This now seems to be in reverse:
The proportion of under-25s who are not in either employment or full-time education had been coming down for three years, but for six months it has hardly moved from just over 14 per cent:
And unions remain concerned about what is happening to earnings. If we use the ONS data for average weekly earnings in constant 2000 prices as a ‘real wage’ measure, we can see that real earnings growth using the regular pay measure is stuck at about 2 per cent:
Last month some people were kind enough to say that the chart I included to show how much lost ground there is on real pay was useful, so I’ve updated it here.
The red line is what actually happened to earnings. The blue line is where earnings peaked before the recession, and we’re about £12 – £13 a week below that in 2000 terms, which translates to a bit over £17 in today’s terms or £900 a year.
The black line is where real weekly earnings would have reached if we’d continued to see wages growing at 2.2 per cent a year, which was the average pre-recession rate. Making up that gap would require more than £60 a weekly in 2000 terms, well over £80 in 2016 prices. This is more than £4,300 a year – equivalent to a 17.8 per cent pay increase!
Taken together, all these warning signs should make any trade unionist think carefully before voting for the UK to leave the European Union. The OECD, the Governor of the Bank of England, the Institute for Fiscal Studies and most independent economists have warned that Exit would be a risk to British prosperity. They may disagree about the details of the likely outcome, but all agree about the risks. As the International Monetary Fund put it:
A vote for exit would precipitate a protracted period of heightened uncertainty, leading to financial market volatility and a hit to output. Following a decision to exit, the UK would need to negotiate the terms of its withdrawal and a new relationship with the EU … These processes and their eventual outcomes could well remain unresolved for years, weighing heavily on investment and economic sentiment during the interim and depressing output. In addition, volatility in key financial markets would likely rise as markets adjust to new circumstances.
Britain’s labour market is much more fragile than it looks – Exit is too much of a risk.