Economic recovery now feeding through to the labour market

Press Releases

16 Oct 2013

Nigel Meager, Director of the Institute for Employment Studies, comments on today's ONS Labour Market Statistics:

‘Today's labour market statistics from ONS contain broadly good news.

‘After several months with all the main indicators moving in a positive direction, it's now safe to say that economic growth is, at last, starting to feed through into the UK labour market.

‘Compared with this time last year, employment is up by 0.9%, the headline unemployment figure is down by 1.6% (and the claimant count by a much larger 13.7%), while job vacancies are up by 11.9%.

‘But there's still a long way to go, with unemployment at 2.4 million, over 800,000 more than at the start of the financial crisis in 2007. One feature of the recent downturn has been that employment and unemployment have been much less sensitive to GDP changes than in previous recessions.

‘On the positive side this means that the labour market wasn't as badly hit as economists expected: employment held up better than before, with more of the hit being taken by reduced working hours and real wages. The flip side of this coin is that those in work have experienced an unprecedented squeeze in living standards. But it also means that employment will be less responsive to GDP in the upturn, so we can expect the current improvement to be the start of a fairly ‘slow burn‘ jobs recovery.

‘It is interesting to note that while employment increased by 0.9% in the last year, the number of hours worked in the economy grew faster (by 2.4%). Many employers can respond to the upturn without a proportional increase in the number of people employed, simply by increasing the working hours of their existing workforces, many of whom are keen or desperate to increase their working time. The recent controversy over zero-hours contracts is a further symptom of this, and the number of involuntary part-time workers (who'd prefer a full-time job) remains at an historical high.

‘Finally, today's figures confirm that the ferocious squeeze on real pay levels continues. There is huge pent-up pressure for wage increases in the system. As the recovery proceeds, employers may find it harder to resist this pressure, and any wage catch-up will further dampen any positive impact of growth on employment levels. ’


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.

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.

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