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Ian Brinkley
Economic Advisor
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Ian Brinkley

What an odd jobs recovery

Authors: Ian Brinkley Ian Brinkley

20 June 2011


The jobs recovery has been far stronger than expected. Over the past year, total employment has gone up by just over 400,000. Yet for the past six months the official statistics show underlying economic growth was close to zero. My money is on the GDP figures being revised upwards. We seem to be better at counting the number of people in work than estimating the value of output, at least in the short term.

But even so, private sector employers appear oblivious to all the warnings from some pundits and economists that the recovery is under imminent threat from falling real wages and public sector cuts at home and financial instability overseas. The odd nature of this recovery is reinforced if we look at both the strength and the composition of job growth in the first year of the 1990s jobs recovery.

Between the first quarter of 1993 and the first quarter of 1994, total employment went up by about 130,000. This is less than one third the increase seen between the first quarter of 2010 and the first quarter of 2011.

And the composition of those jobs has been very different. Over the past year many of the new jobs have been full time and permanent and male employment has grown more than female employment. In the first year of the 1990s recovery all of the net growth in jobs was part time or temporary and for women, with full time and permanent work and jobs for men still falling.

Of course, one year does not make a trend. The 1990s recovery eventually saw more full time and permanent jobs and jobs for men as well as jobs for women. But it was a long time coming - even by 1996 full time work was still lower than in 1990.

This experience also had a profound impact on common views on the future of work. The 1990s was the decade when the future was supposed to lie with flexible work forms – temporary jobs, self-employment, portfolio work, second jobs, and the end of stable and long term employment relationships. Yet the decade that followed and the shape of the current jobs recovery confounded almost all of these expectations.

We face exactly the same problems today as those pundits and commentators did in 1993 in seeing a clear way forward. We do not as yet have a clear and coherent story for why the labour market has behaved in such a remarkably robust and benign way in the face of so much economic turmoil. And that makes it hard to work out what is likely to prove a durable change and what will prove a temporary blip.

It feels hard to be as confident about the next twelve months. The public sector austerity measures have barely started to bite, the Bank of England cannot be expected to delay interest rate increases forever, real wages and incomes for many will decline with parts of the retail sector already signalling distress. And our exports will struggle to grow if the recovery in our key European markets founders. The best guess is still fewer jobs and higher unemployment over the next twelve months than in the year to date.

But the nagging doubt remains – could the labour market continue to buck the apparent bad news elsewhere? Perhaps we should cross our fingers and hope the employment forecasts published by the Office for Budget Responsibility (OBR) have got it about right. They have so far.