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Still no clarity on labour market recovery

15 June 2011

The labour market figures released by the Office for National Statistics today again show a mixed picture and leave considerable doubt over whether we are seeing a sustained recovery in the jobs market, three years on from the start of recession.

• The headline unemployment figure from the Labour Force Survey recorded a significant fall of 88,000 over the quarter to April, and unemployment still stands below the 2.5 million mark.
• Total employment grew by 80,000 in the quarter to April, and the figures for public and private sector employment (which refer to March 2011), show that the growth in private sector employment (104,000) since December 2010 more than offset the decline in public sector employment (24,000), although the public sector figures for this period include significant numbers of temporary jobs related to the Census.

Some other figures are less positive, however:

• The more recent monthly claimant count figure for unemployment, recording the number of people claiming Jobseekers' Allowance, increased by nearly 20,000. It now stands within 7,000 of the 1.5 million level. The increase in JSA claimants occurred among both men and women.
• The total number of job vacancies fell again by 39,000 in the 3 months to April. The current total of 456,000 unfilled vacancies in the economy is now back at its level of late summer 2010, and these figures suggest that underlying labour demand may be falling again.
• Despite the increase in the overall numbers employed, the total number of weekly hours worked in the economy fell back by 14.5m in the quarter to April. Total hours worked are now almost back to the levels recorded in late 2009 and early 2010.

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

‘The next few months will be critical for the UK labour market. During this period the effects of public spending cuts will start to show up in a major way in the employment figures. Will the much-vaunted private sector recovery begin to generate jobs on a scale necessary to compensate for the cuts? Or are the cuts simply taking too much demand out of the economy too quickly and threatening the already tentative recovery?

‘On the basis of today's figures, it would seem that the jury is still out. At first glance the latest data suggest relatively good news, with private sector jobs growth still outweighing public sector job loss. It needs to be stressed, however, that the bulk of the employment impact of public sector cuts is yet to be felt: these data do not yet include the effect of the cuts taking place during the current financial year starting in April. The public sector figures are also still flattered somewhat by the inclusion of temporary Census jobs.

‘Further, when we look at unemployment, the picture remains unclear, with a big reduction in the Labour Force Survey figure being set against an increase in the more recent claimant count data. Other indicators of labour demand also reveal signs of underlying weakness, with reduced numbers of vacancies, and a surprising fall in the number of hours worked in the economy

‘ The overall picture suggests a fragile, weak recovery in the labour market, which could easily be tipped into reverse, as the public sector job loss continues and intensifies.’

-ENDS-

About IES:

The Institute for Employment Studies is an independent, not-for-profit centre for research and evidence-based consultancy on employment, the labour market, and HR policy and practice. Its goal is to bring about sustainable improvements in public employment policy and HR practice. It was founded over 40 years ago.

For further information or comment, contact Nigel Meager or call , or the IES press office, or call 01273 763414.