June 2015 CBI/Pertemps Labour Market Update

June 2015 CBI/Pertemps Report

Today’s labour market statistics reflect the good health of the economy. Employment has increased again thanks to private sector businesses offering more and more permanent, full-time job opportunities.

Unemployment has continued to fall as those who have been out of work for the longest periods of time move back into employment. Positively, the number of young
people not in education or employment has also fallen.

The news is good for those in work too. The pace of wage growth in the private sector has risen once again and is now at its highest rate since the final quarter of 2008, just after the recession began. However, to ensure sustainable higher pay growth, we will need to see improvements in productivity.

More people find work with an employer...

  • The latest labour market statistics show that the number of people in employment continues to rise.
  • In the three months to April, 114,000 more people moved into work. The employment rate now stands at 59.9% for those aged 16 and over.
  • Reflecting recent trends, the rise in employment was driven by growth in the number of people working as employees (+169,000). Positively, employers were able to offer seven out of ten employees a full-time role.
  • This increase in the number of employees more than offset a fall in self-employment (-54,000).
  • Encouragingly, the rise in employment was driven by the private sector. In the three months to April, 124,000 more people found work with a privately run firm while employment in the public sector fell (-10,000).
  • The private sector now accounts for 83% of total
    employment.The sectors propelling jobs growth forward in the three months to March were: professional, scientific and technical activities (+78,000); wholesale and retail(+55,000); and manufacturing (+34,000) (Exhibit 1).

 ...and unemployment continues to fall

 Reflecting the rise in employment, unemployment across the UK has fallen. In the three months to April, the number of people out of work decreased by 43,000. This means the unemployment rate is now at 5.5%, creeping down towards its pre-crisis level (5.2%).

Looking at the unemployment figures in more detail:

  • The fall in unemployment was caused by a decline in the number of people out of work for over a year (-55,000).
  • In contrast, there was actually a rise in the number of people out of work for six to 12 months (+11,000).
  • Short-term employment (those out of work for less than six months) remained broadly unchanged (+1,000).

As Exhibit 2 shows, short and medium-term unemployment is now back down to pre-recession levels. Because of this, it may be that future reductions in the overall unemployment rate are driven by further declines in long-term unemployment. We will keep an eye on future labour market data to see what happens.

 

Youth unemployment is broadly unchanged

The number of 16-24 year-olds out of work and looking for work remained more or less unchanged in the three months to April (-2,000). As a result, the youth unemployment rate was broadly unchanged, at 16.1%.

However, the headline data masks the different experiences of different groups of young people:

  • There was a healthy decline in the number of young people not in employment or education (-21,000). The unemployment rate amongst this group is now 13.7%, only slightly above its pre-recession rate (13.1%).
  • This decline was offset by an increase in the number of young people in education, but still seeking part-time work (+19,000). The unemployment rate amongst this cohort (23.3%), is still well above its pre-crisis rate (16.7%).

 More older people in the workforce

 Young people are not the only group it is interesting to look at in more detail. Here we look at changes in the number of older people in employment.

During the 1990s, the share of those in work aged 65 and over was relatively stable, fluctuating between 1.5% and 2%. Since the early 2000s however, this proportion has been rising. The latest data shows that this group now accounts for 3.8% of those in employment (Exhibit 3).

Reasons for this include financial pressures, a higher state pension age, people with longer life expectancies choosing to remain active for longer and the abolition of the default retirement age.

The sectors in which those aged 65 and above tend to work in are: public administration, education and health care (36%); distribution, hotels and restaurants (19%); and banking, finance and insurance (15%). Not surprisingly, older workers are more likely to work part-time or have flexible working arrangements.*

 

Employment increases in two thirds of regions and nations...

Turning now to look at the UK¡¦s nations and regions, reflecting the experience across the UK as a whole, the majority of areas saw the number of people in work tick up.

Southern regions outside London led the way on employment growth in the three months to April, with the south west (+42,000) and south east (+36,000) seeing the largest increases. The East of England (+26,000) and north west (24,000) also saw strong employment growth.

  • Other areas seeing employment rise were Scotland (+14,000), Northern Ireland (+12,000), Wales (+9,000) and the East Midlands (+6,000).
  • In the West Midlands (-1,000) and north east (-3,000) employment remained more or less unchanged.
  • Only two areas saw the number of people in work fall. These were Yorkshire and Humber (-14,000) and London (-39,000).

...and these areas tend to see unemployment fall too

Those nations and regions that saw the strongest employment growth typically saw unemployment decline too (Exhibit 4).

  • In the three months to April, the East of England (-22,000), south east (-20,000) and north west (-16,000) saw the most significant falls in unemployment.
  • Unemployment also fell, although by less, in the south west, West Midlands and north east (all -5,000).

 

 

  • In the East Midlands (-2,000), Scotland (+1,000), Northern Ireland, London (both +2,000) and Wales (+3,000) unemployment remained broadly similar.
  • The only region to see unemployment rise was Yorkshire and Humber (+24,000).

Private sector pay growth picks up further

Today’s data shows that wage growth has risen further, thanks to the private sector (Exhibit 5).

  • Annual growth in regular pay (which excludes bonuses) in the private sector sped up from 2.8% in the three months to March to 3.2% in the three months to April.
  • Looking at total pay (which captures bonus payments), we see a similar story with pay growth accelerating from 2.8% to 3.3% over the same time period.
  • This healthy pay growth, set alongside rock bottom inflation (annual CPI inflation over the same period was 0.0%), is further evidence that the wage squeeze has
    eased.

That said, to deliver sustainable higher wage growth, we need to see productivity rise. This means investing in skills and government support for innovation and
investment in next month’s budget.

 

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