Unemployment has continued to fall, with the rate now standing at 6.2% (compared with 6.4% in last month's statistics). The number of employees in employment has risen by some 65000 over the last quarter. Almost half of this gain (some 30,000) is in part-time work, once again reinforcing concerns that there remains a significant measure of underemployment. The numbers of part-time self-employed workers have also risen (by 17,000), but full-time self-employment figures have fallen (by 13,000), emphasising the insecure nature of many of these jobs. Overall, while the continued fall in unemployment is welcome, the impression given by these data is one of a recovery that is struggling to sustain itself.
At regional level, there have been marginal increases in the unemployment rate in the North East, the South West and in Wales. By some distance, this leaves the North East (at 9.9%) the region with the highest unemployment rate.
Of those regions where the unemployment rate has fallen fastest, the fall has been especially pronounced in the North West, Yorkshire and Humberside, the East Midlands, London and Scotland. The unemployment rate in Scotland, at 6%, is currently the lowest of any of the four home countries.
One reason why the rate at which unemployment might be slowing down is that it has fallen almost as far as it can go - in other words that capacity constraints are starting to bite in the labour market. If that were the case, we would start to see skills shortages and consequently increasing earnings. There have, to be sure, been some signs of this in some sectors, notably manufacturing, in recent months. But overall, the rate of growth of earnings remains extremely muted. In July, the year on year growth in average weekly earnings amounted to just 0.7% - up from 0.6% the previous month but still a long way short of the current rate of price inflation. Wage inflation remains relatively high in manufacturing (1.8%) though it is slowing. In construction, wages rose by 4% year on year - and this sector will be an interesting one to watch over the coming months. But in services, which dominate the UK economy, wage growth is still very sluggish indeed (0.3% overall), and wages are still falling in some sectors. While underemployment remains so high, the evidence from earnings data is that we are still a long way short of capacity.
The resolution of the cost of living dilemma lies in boosting productivity. But this remains stubbornly sluggish. The large increase in business investment over recent months should help restore productivity growth, so there is cause for some degree of optimism that real wage growth should reappear sometime in the next year. But, as The Work Foundation's roundtable on productivity established, there are likely to be some deep-seated and long-lasting barriers to a rapid recovery. Growth may continue, but it is likely to do so at a slower rate than in recent months, and it is clear the restoration of a fully normal economy is going to be a long term project.
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