The Chancellor, George Osborne, might have chosen a better day to deliver his fourth Budget statement to Parliament. For months now, each set of official labour market figures from the Office for National Statistics (ONS) has shown falling unemployment. On the morning of Budget day, however, the news was less good – unemployment up by 7,000 in the three months to January.
The latest headline rise in unemployment is disappointing, although primarily due to a flood of women into the labour market at the turn of the year rather than weak employment growth (see headline figures below). On the contrary, the number of people in work again rose sharply, with a big rise in full-time employees more than offsetting a fall in part-time employment and self employment. Private-sector job creation continues to rise at a remarkable pace, while the loss of public-sector jobs has slowed from around 30,000 to 20,000 per quarter. Overall, job vacancies are up very slightly, redundancies down and, encouragingly, long-term unemployment is down. However, it’s clear that people are experiencing real pay cuts to price themselves into work, and the rate of growth in weekly earnings is slowing yet again from 1.3% to 1.2% at a time when price inflation is on the rise.
The big worry in these latest figures is what appears to be a more fundamental renewed deterioration in youth unemployment. Employment has fallen for 16- 24-year-olds while unemployment has risen sharply, with the core group of young people not in full-time education, who had a relatively good 2012, now being hit hard once again despite a significant amount of government support being targeted at them.
But we should be careful not to go overboard on the doom and gloom. With the UK economy at risk of a triple-dip recession, almost 7,000 public-sector jobs being shed each month and 2.52 million people unemployed it might seem odd to suggest that we’ve just been through a jobs boom. Yet believe it or not, 2012 was the best year for employment growth since 2000 and surpassed by only nine other years in the previous four decades. What makes the 2012 jobs boom truly extraordinary is that all the other jobs booms since the 1970s occurred during periods of economic boom, with gross domestic product growing well above the underlying trend rate, rather than stagnation.
Increase in employment
The 2012 jobs boom can’t be explained solely by more people working short hours. Full-time employees account for half the total increase in employment. In only two years since the early 1970s has the volume of work undertaken in the UK economy as measured by total weekly hours worked increased at a faster annual rate than in 2012.
A jobs boom without economic growth is unprecedented in recent UK economic history. The downside, of course, is a fall in labour productivity and a continued real-pay squeeze. This might justifiably be deemed a price worth paying for more jobs. But a jobs boom that doesn’t deliver improved living standards is like nothing we’ve seen before in the UK and not necessarily a signal that the economy is heading in the right direction. The extraordinary jobs boom may console the Chancellor but doesn’t lessen the onus on him to deliver a Budget for growth.
John Philpott, formerly chief economic adviser at the CIPD, is now director of independent research organisation The Jobs Economist