Employment Drops And Pay Growth Slows
Today’s labour market data painted a poorer picture than we have seen in the recent past. The number of people in employment fell while at the same time the number of
people out of work and looking for work rose.
Although this is clearly disappointing, it is unlikely to signal the start of a significant deterioration in employment prospects given the strength of economic activity. Instead, it is more likely that the rate of improvement in the jobs market is levelling off following a period of solid jobs growth as the economy has continued to recover from the downturn.
For those in work, the picture was also slightly less rosy. Underlying growth in base pay in the private sector slowed slightly. At the same time, the rate of growth in bonus payments slowed significantly. This meant that the pace of total pay growth also fell.
Fewer People Are In Work
- Today’s data shows that the number of people in employment declined.
- There were 63,000 fewer people in work in the three months to June compared to the previous quarter (Exhibit 1).
- The decline in employment was driven by a fall in the number of part-time employees (-66,000).
- The number of people who were self-employed rose a little (+8,000), slightly offsetting the fall in employees.
- This comes against strong private sector jobs growth over the past year. In fact, 485,000 additional people found work with an employer over the past 12 months
while 95,000 fewer people were working for themselves.
...particularly amongst men...
Looking at the gender split, the decline in employment was entirely due to more men moving out of work.
- In the three months to June, the number of men in employment fell by 71,000. This left the employment rate amongst men at 65.1%
- The number of women in work rose very slightly (+8,000). As a result, the employment rate amongst women stood at 54.7%. But, this is still well below the
employment rate amongst men.
- Women doing better than men during the recovery is not news. Throughout this period, it has been women who have benefited most from the increasing
availability of job opportunities.
...but this is unlikely to mark the start of a significant deterioration
While the fall in employment is clearly disappointing, the picture is not quite as bad as it may seem at first glance.
This is because comparing today’s employment data for the three months to June with data for the three months to March, which was exceptionally strong, naturally makes this latest data appear weaker.
In fact, single month employment estimates suggest that the number of people in work in June was actually higher than in May (+56,000).
So, today’s data is unlikely to mark the beginning of a more dramatic deterioration in employment. Instead, the data may suggest that, after a period of rising employment following the crisis, the jobs market is levelling off. That
said, it is still too early to tell and we will continue to monitor the situation in future months.
Overall unemployment creeps up...
Reflecting the fall in employment, latest labour market data shows that unemployment has crept up.
- As Exhibit 2 shows, in the three months to June the number of people out of work and looking for work increased by 25,000. This took the total number of unemployed people to 1.85 million.
- As a result, the unemployment rate edged up very slightly to 5.6%, which was in line with the consensus expectation.
Similar to last month, much of the rise in unemployment has been due to an increase in short- and medium-term unemployment.
- The number of people unemployed for up to six months increased by 17,000 in the three months to June.
- Similarly, the number of people unemployed for six to 12 months increased by 21,000.
- More positively, long-term unemployment continued to decline. There were 13,000 fewer people long-term unemployed (seeking work for over 12 months).
...but not amongst young people
Although unemployment edged up overall, for young people the picture remained broadly unchanged.
There were 738,000 people aged 16-24 who were unemployed in the three months to June.
This was very similar to the previous quarter (three months to March) when 735,000 young people were out of work and looking for work.
As a result, the youth unemployment rate, at 16.0%, is also broadly similar to the previous quarter ( Exhibit 3). But, it is worth remembering that at 16.0%, the youth unemployment rate is still much higher than before the recession began (14%).
Fall in employment concentrated in three regions…
The fall in employment across the UK as a whole was concentrated in three regions (Exhibit 4 over l eaf).
- The regions seeing the largest declines in employment were the south east (-68,000), the north west (-38,000) and the West Midlands (-27,000).
- Employment also fell in the north east (-18,000), Northern Ireland (-17,000), Scotland (-11,000) and London (-4,000), but less significantly.
- Elsewhere the story is more positive as the number of people in work actually rose. These regions and nations included the East of England (+7,000), Yorkshire and Humber (+16,000), the East Midlands (+24,000), the south west (+32,000) and Wales (+42,000).
…and so too was the rise in unemployment
The overall rise in unemployment was similarly felt most in three of the UK’s nations and regions.
- The overall rise in unemployment was felt most keenly in London (+22,000), the south east and north west (both +11,000).
- Unemployment also rose, albeit to a lesser extent, in the East of England (+9,000), the north east (+7,000) and the south west (+5,000). In Northern Ireland (+1,000), Yorkshire and Humber and the East Midlands (-3,000) unemployment was broadly unchanged.
- Encouragingly, a few regions and nations saw unemployment fall. These were Wales (-9,000), the West Midlands (-12,000) and Scotland (-13,000).
Pay growth falls, driven by bonus payments
Today’s data show that underlying base pay in the private sector weakened slightly.
- In the three months to June, annual growth in regular pay (excl bonus) in the private sector stood at 3.3%,compared to 3.4% in the three months to May (Exhibit 5). Acr oss t he economy as a whol e r egular pay was unchanged at 2.8%
- Annual growth in total pay (incl bonus) in the private sector fell more substantially, from 3.9% in the three months to May to 2.8% in the three months to June. The picture was similar looking at the whole economy, with total pay growth dropping from 3.2% to 2.4%.
- The driving factor behind the dip in total pay growth was a fall in bonus pay. In the private sector this fell from 5.0% to -4.1% over the same period.
Follow us on LinkedIn: