UK labour market: further improvement but longer-term concerns

Press Releases

8 Jan 2013

Today's data from the Office of National Statistics show further rises in employment continues, but with productivity continuing to fall, there are concerns about the long-term trajectory of the UK economy.

The key features of the today's figures are that:

• Employment is up by 90,000 in the quarter to November 2012, due to a large rise in full-time employment, with the numbers of part-time employees falling.
• Unemployment fell by 37,000 in the quarter to November 2012, leaving the total at 2.49 million. The more recent figure for those claiming Jobseekers' Allowance also fell, by 12,100 in December, to 1.56 million.
• The data also suggest improvements in labour demand from employers, with unfilled vacancies slightly up on the quarter (by 10,000), although redundancies were up by 27,000. These figures will not include the effects of the recent closures of stores such as Jessops and Comet.
• Total weekly hours worked in the economy grew over the quarter to 944.3 million, almost back to pre-recession levels.
• While output per worker rose in the third quarter of 2012 by 0.6%, output per head, generally considered to be the best measure of productivity, fell for the fifth quarter in a row.
• Earnings rose by 1.5%, significantly less than inflation and indicating a further fall in real wages.

Jim Hillage, Director of Research at the Institute for Employment Studies, commented on today's jobs figures from the Office of National Statistics:

‘While the continued rise in people in work can be seen as good news and employment and the total hours worked in the economy are now back above its pre-recession levels, GDP remains 4 per cent below pre-recession levels.

‘Employers are able to take on more people because real wages have fallen steadily over the past three to four years, as can be seen in the following chart. However, there has not been a commensurate increase in output and therefore productivity per hour has also fallen as hours worked have risen.

‘While it is good that there is more labour activity in the economy, as work is generally good for people's well-being, there is a real concern that, contrary to what the Government would like, the economy is starting to follow a lower productivity, lower wage trajectory. This is unlikely to be a successful route to sustained higher levels of economic growth in the long-run.’

Index of real wages, hours worked and productivity, UK, 2008-2013 (Jan-Mar 2008 = 100)

Source: IES from ONS data - CHART

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Notes to editor

About IES

The Institute for Employment Studies is the UK’s leading independent, not-for-profit centre for research and evidence-based consultancy on employment, the labour market, and HR policy and practice.