Trying not to read too much into today’s employment figures
The latest employment figures show that the labour market recovery hasn’t reversed, but the story of the last six months hasn’t changed much either: little improvement and some worrying signs of weakness. The latest figures, for August to October, show the employment level down 6,000 and the employment rate down 0.1 points to 74.4, though I wouldn’t make too much of that as these falls are well within the statistical margin of error (plus or minus 174,000 and 0.4 points). The fall affected employees (down 6,000) and self-employed (down 2,000), and hit full-time workers harder (down 51,000) than part-time (up 46,000). While self employment remained much the same overall there was a fall of 55,000 in full time self-employment and a rise of 53,000 in part-time, continuing a trend of recent months that has seen part time self employment rise 3.4 per cent on the year – while the number of full time employees rose only 0.8 per cent over the year.
The actual weekly hours worked level is down 4.9 million from May – July, but in a labour market with 31.8 million workers that represents a change of just 0.5 per cent, the average change from one quarter to the next has been 0.4 points over the past 12 months, so that isn’t very remarkable.
The unemployment rate was unchanged, at 4.8 per cent, but the unemployment level was down 16,000 – also within the margin of error. The claimant count measure of unemployment was up very slightly (by 2,400, to 809,000) and the claimant count rate was unchanged (2.3 per cent). The ratio of unemployed people to job vacancies was unchanged, at 2.1 – this ratio has changed by just 0.1 this year.
Long-term unemployment has fallen by more significant amounts: unemployment over 6 months is down 17,000 to 659,000; over 12 months down 31,000 to 419,000 and over 24 months down 31,000 to 236,000.
Most of these figures are good by historic standards, and there’s very little change from the May – July figures – the fall in full-time employment is the only item in the list above that really could be worrying and it may well be a blip, not the start of a trend. There’s a broader concern that, while the labour market isn’t deteriorating there isn’t any sense of momentum, of further improvements to come and with what we know about businesses waiting to see what will happen before they make major decisions, that isn’t surprising.
Pay, however, continues to be a real worry. In October, the annual growth rate for real pay was 1.7 per cent – for the fourth successive month for regular pay, the second month for total pay. When adjusted for inflation, weekly earnings are still well below their April 2008 values (regular and total pay definitions). In fact, regular pay still hasn’t reached its January 2011 level and total pay hasn’t reach the level it was at in November 2010. Last month, the Office for Budget Responsibility’s Economic and Fiscal Outlook forecast that average earnings will rise 2.2 per cent this year and 2.4 per cent in 2017 – forecasts that are already down from their March forecast of 2.6 and 3.6 per cent. Last month, the Treasury’s monthly round-up of the forecasts of independent economists showed their average forecasts 2.3 per cent for 2016 and 2.3 per cent in 2017. These averages may come down in the light of the OBR report. Given the importance of household incomes for demand in the economy pay is a significant question mark over our economic future.