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No green shoots in the jobs market

15 March 2012

Today’s figures from the Office of National Statistics show that the UK labour market continues to stagnate, with little or no evidence of a in improvement in labour demand. Most indicators show a small deterioration compared with recent months:

• The headline unemployment figure from the Labour Force Survey increased by 28,000 over the quarter to January taking the total to 2.67 million, its highest level for over 17 years. The unemployment rate stands at 8.4 per cent.
• Within the overall total, youth unemployment continued to grow and has now reached 1.04 million, 22.5 per cent of the economically active population aged 16-24.
• The monthly claimant count figure (the numbers claiming Jobseekers’ Allowance) rose by 7,200 in February, taking the total to 1.61 million. It is now almost back up to its peak in the depths of the downturn in late 2009.
• The numbers in employment grew slightly by 9,000 in the quarter to January. The latest figures for public and private sector employment were also released today (for the quarter to December) show that the total in the public sector fell by 37,000 and that this was outstripped by private sector growth of 45,000 jobs.
• Job vacancies remained largely flat, recording a small increase of 15,000 to 473,000 in the three months to February.
• The overall level of redundancies grew slightly over the quarter to January (by 11,000).

Nigel Meager, Director of the Institute for Employment Studies commented:

‘The overall picture revealed by these figures is one of little real change. Small positive improvements (slight employment growth, a small increase in redundancies, some reduction in longer-term unemployment) are offset by small deteriorations in other indicators – overall unemployment and youth unemployment up slightly along with redundancies.

‘Until we see a sustained run of several months improvement in all the main indicators, it is difficult to find real cause for optimism. The labour market has been stuck in a double bind of public sector cuts and private sector stagnation for several years, with no real improvement in sight. Job vacancies dropped fast at the beginning of the recession to below 500 thousand, where they have stubbornly remained since late 2009. Similarly, and lagging slightly, unemployment grew rapidly in the recession, but has languished at or slightly above 2.5 million since autumn 2010. None of this is surprising since GDP, after some signs of improvement in early 2010, has flat-lined ever since at 4 per cent below its pre-recession peak.

‘Much hope rests on a private sector resurgence filling the gap left by public sector austerity. On the face of it the latest quarterly figures look promising with a small positive net balance in favour of private sector jobs. Looking over a slightly longer timescale, however, private sector jobs are still struggling to compensate for public sector reductions: over the year to December 2011, 270,000 jobs disappeared, while the private sector gained 226,000. We also need to bear in mind that much of any apparent shift from public to private sector jobs is simply a relabeling effect as many public services are shifted to being delivered under contract by the private sector.

‘Two underlying factors suggest that the current stagnation is likely to continue for many months to come. The first is that the bulk of the planned public spending cuts is still to come. The second is that that many private employers took steps to retain key staff during the downturn (through measures such as wage freezes and short-time working) and can accommodate modest upturns in business without significant hiring.

‘With this background, a lot is resting on next week's budget measures. Assuming that no flexibility on the scale and pace of deficit reduction can be expected, the Chancellor must be seen to take real and significant steps to boost growth and business confidence.’

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For more information, or to arrange further interview with Nigel Meager, please contact Keir Bosley at CHA on 020 7580 7025 or keir.bosley@chapr.co.uk

Today’s full ONS figures can be found at: http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/march-2012/index.html

About Nigel Meager:

Nigel is a labour economist by training, and a well-established international expert on labour market and employment policy issues. He has worked at IES since 1984, following posts at the Universities of Bath and Glasgow. He has been Director of the Institute since 2004. He has a long and varied research track record covering the functioning of national, regional and local labour markets, unemployment, skill shortages, labour market flexibility, changing patterns of work and equal opportunity policies and practices. He has, since the late 1980s, had a particular interest in the role of self-employment and small businesses in the labour market. A major strand of his recent work has focused on the evaluation of public training and employment programmes and active labour market measures, with a particular focus on the participation of disabled people and other disadvantaged groups in the labour market

See: http://www.employment-studies.co.uk/cvs/cv.php?contact_id=nm

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.