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Ian Brinkley
Economic Advisor
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Ian Brinkley

Heading for a two nation recovery?

Authors: Ian Brinkley Ian Brinkley

23 March 2011

The latest labour market statistics show public sector employment falling, but more than offset by private sector job growth. Over the year to December 2010 public sector employment fell by 132,000 and private sector employment grew by 428,000, giving a net rise in total employment of 296,000.  On the face of it, the Office for Budget Responsibility (OBR) forecasts for a strong recovery in employment despite large public sector job losses looks credible.

However, the trends have been moving in the wrong direction, with accelerating job losses across the public sector and decelerating job generation in the private sector. Moreover, what has been less noticed is the regional distribution of public sector job cuts with public sector jobs falling much faster in Northern England than in Southern England.

Over the year to December 2010 public sector employment has fallen twice as much in Northern England (North West, North East, Yorkshire and Humberside) than Southern England (South East, London, East, South West). Employment fell by 3.3 per cent in Northern England and 1.9 per cent in Southern England.

The devolved governments of Scotland, Wales, and Northern Ireland also saw on average bigger falls (2.3 per cent)  than the UK average (2.1 per cent). In contrast, the Midlands as a whole fared relatively well, with little change in job totals.

This development is worrying. Much of Northern Britain has a higher share of jobs in the public sector and over the past decade has been more dependent on public sector job growth than in the South. Now these sources of job creation are being removed at a faster rate than in the South, the private sector in the North will have to generate even more jobs.

There are parts of the North which are relatively strong and where job generation will match the challenge. And some parts of the South have also suffered above average cuts in public sector jobs, with a 3.3 per cent fall recorded in the South West. But in many areas of Northern Britain the private sector is already weak and will struggle to create enough jobs to hold unemployment down. The Budget will have to set out a convincing story about how private sector job generation in the weaker areas can be boosted if we are to avoid a Two Nation Recovery.

Regional job losses in the UK 2009Q4 to 2010Q4 

 Click on graph to enlarge image 

 

 

Note: All figures headcount, seasonally unadjusted. Public sector includes central and local government, NHS, public corporations and publicly controlled banks. Northern England includes North West, North East, Yorkshire and Humberside; Devolved governments includes Scotland, Wales, Northern Ireland. Southern England includes South East, London, Eastern, and South West. Midlands includes West and East Midlands.