December jobs figures: reasons to be cheerful, but signs of three big challenges for next year
17 Dec 2019
Tony Wilson, Institute Director
After two months of pretty weak jobs figures, and growing concerns that the market was being weighed down by uncertainty on Brexit and the global economy, today’s jobs stats will give Ministers yet more reasons to be cheerful this week. Digging deeper though, as with recent months there remain some worrying signs as we enter the new year.
Covering August to October – so the period before the Prime Minister negotiated his new Brexit deal – today’s data shows that the employment rate has edged up to a new high of 76.2%, while unemployment remained at 3.8% and ‘economic inactivity’ (the measure of those neither looking nor available for work) is at a near-record low of 20.8%.
While the data underneath these rates has been broadly flat in the last couple of months, it is worth noting that the single-month estimates for the last two months have been very strong (with the October estimate for employment reaching an exceptional 76.7%). We don’t usually report on single-month figures, as these jump significantly from month-to-month and so the official estimate uses an average of the most recent three months. But if nothing else, the record-breaking October figure means that Ministers can likely look forward to a couple more months of good news as this works its way through the quarterly average.
The strong story on employment has been driven by full-time work, which has accounted for nearly 90% of all of the growth in the last year. It has also been mainly accounted for by growth in self-employment (a change that we reported on back in July), which is now at a record level of 4.96 million and has accounted for two thirds of all employment growth. Looking at these two factors combined, nearly half of the growth in employment in the last year has been in full-time self-employment – which following years of decline after the recession is now back to record levels.
These trends also give an indication of the underlying uncertainty in the jobs market – the first of three big challenges in today’s data. With vacancies falling significantly again this month, dipping below 800 thousand for the first time since 2017, and are falling at their fastest rate in a decade – it appears that as with recent months employers are increasing hours and their use of self-employed workers rather than increasing recruitment. How far this is being driven by the global slowdown and how far by uncertainty on Brexit remains to be seen – but both factors are likely to only grow in importance during 2020 and could signal further trouble ahead.
A second concern for government will be around today’s earnings figures – which although decent by the standards of recent years (with regular pay up by 3.5% and pay in real terms up 1.8%), have dipped back from the 4% and 2% levels reported in the autumn. And while real weekly average earnings are tantalisingly close to recovering to pre-crisis levels (there is now just £1 in it), the ‘lost decade’ in earnings has now stretched to eleven and a half years. Fundamentally, despite a pretty tight labour market, weak growth – particularly in productivity – combined with continued employer uncertainty is holding back growth in pay.
A third and final concern today is the continued and seemingly inexorable rise in those out of work due to long-term ill health, with the numbers ‘economically inactive’ for this reason up by 90 thousand in the last year to nearly 2.1 million – the highest its been since 2015.
With both unemployment and long-term unemployment falling (with the latter dropping to its lowest level since 2005 – a true success story), the labour market is getting close to its full capacity. So there is both an economic and a social imperative to do more to support those with health conditions to enter work and stay in work. And despite this being a government priority in recent years, we pointed out last week that this got virtually no mention in any party manifesto. Today’s figures show that if anything we are going backwards. The Conservatives have consulted on potential approaches to employer-facing reforms in this space, and promised in their manifesto a comprehensive strategy for disabled people in 2020 which will likely also cover support for those with health conditions. Today's figures reiterate the need to act, and that this needs to be matched with both investment and reform.
Any views expressed are those of the author and not necessarily those of the Institute as a whole.