Has the economy turned a corner?
Authors: Ian Brinkley
11 September 2013
The employment figures out this morning (11 September) have as usual been the subject of much political debate. The Coalition claims they are further evidence that the economy has tuned a corner. Others have pointed to continued areas of weakness, especially for young people.
Employment increased by 80,000 comparing the period May-July with the previous three months, bringing the annual increase in employment to 275,000 compared with the same three months a year ago. This is respectable, if not exactly earth-shattering by past standards.
The impact on unemployment has been more modest – down 24,000 in May-July compared with the past three months and down just over 100,000 compared with the same three months a year ago. Over the past twelve months, the growth of the working age population and more people actively looking for work means that the economy has had to create nearly three jobs to reduce the unemployment total by one.
More worryingly, job creation has made no impact on levels of youth unemployment, and particularly long term youth unemployment. One in three (33 per cent) unemployed young people between the ages of 18 and 24 had been out of work for more than 12 months in May-July 2013, compared with 30 per cent a year ago.
What is more striking over the past twelve months, however, has been the shift in the composition of jobs growth towards (possibly) more secure and longer hour work. Over the past year, the number of full time employees went up by nearly 360,000. In contrast, the number of employees on temporary contracts went down by over 72,000 and the number of self-employed went down by 50,000.
However, despite the large numbers of full time jobs being created, the number of people in part time jobs who would like a full time jobs remains at record levels. This is likely to reflect both longer term changes but also a desire for more hours in the face of falling real wages for many.
More surprisingly, the number of people in part time employee jobs also fell by about 36,000. The fall in part time work is unusual – one reason may be that sectors such as retail and hospitality which have in the past been big generators of part time jobs have overall shown no jobs growth over the twelve months to June 2013.
We can, I think, say that the labour market overall continues to perform reasonably well, but it will have to do significantly better if it is to make serious in-roads into the overall unemployment total and satisfy the demand for more hours of work. And there is clearly a major structural problem with youth unemployment which, if not effectively addressed, is going to have adverse consequences for a generation.
In the past, I would have been confident about saying the growth in full time jobs and falling temporary and self-employment was a good indicator of growing security of employment and growing confidence about the future. But this may be less true today. For example, most zero hours contracts are full time and even regular contracts of employment are no guarantee that weekly hours of work will not vary. A recent union claim that over five million people are on zero hours looks fanciful, but it would be quite plausible to argue that many people face high levels of job insecurity and insecurity on hours and therefore pay.
We may have a long wait for the return of a strong “feel good” factor from the labour market, no matter how good the overall figures may look to some economists and some politicians.
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