UNEMPLOYMENT BACK TO PRE-RECESSION RATE
Data released today shows that while more and more people are moving into work, the pace of pay growth has continued to ease off.
Positively, the number of people out of work and looking for work declined once again in this month’s data while the unemployment rate fell back to its pre-recession level.
The good news continues as the fall in unemployment was accompanied by an increase in employment. This was mainly thanks to job creation amongst businesses although self-employment did also rise.
For those in work however, the picture was less rosy as the slow down in the pace of pay growth which began in the spring continued in the latest data. And while the good news is that extremely low inflation continues to help pay packets stretch further at the till, we do expect a pick up in price growth in 2016. If real pay is to remain positive next year securing a sustained boost to productivity will be critical.
Unemployment back to pre-recession rate...
Today’s labour market data brings good news as the number of people unemployed fell once again.
- The number of people unemployed declined by 110,000 in the three months to October. This was the largest drop in unemployment in the last year (Exhibit 1).
- As a result, 1.7 million people were out of work and looking for work.
- The unemployment rate also fell back to 5.2% and, encouragingly, has now regained its pre-recession level.
...with young people fairing particularly well
Looking at the data in more detail, although all but one age group saw unemployment fall, improvements in youth unemployment were particularly strong.
- In the three months to October, youth unemployment declined by 98,000. This comprised a fall in unemployment amongst 16-17 year olds of 24,000 and a fall of 75,000 amongst 18-24 year olds.
- Unemployment also fell, but by much less, for 35-49 year olds (-17,000) and remained more or less unchanged for those aged 25-34 (-1,000) and 65+ (-4,000).
- The 50-64 year old age band was the only age group to see unemployment creep up slightly (+10,000).
Employment rises strongly Alongside the decline in unemployment, employment rose across the UK.
- In the three months to October, 207,000 more people moved into employment (Exhibit 2). This was the largest quarterly increase in employment in 2015 so far.
- As a result, the employment rate for people aged 16 to 64 edged up to 73.9%, the highest rate ever recorded.
- Continuing the trend seen in the recent past, the majority of the growth in employment was due to an increase in the number of positions offered by business (+146,000). The positions filled were a mix of full- (+80,000) and part-time opportunities (+66,000).
- At the same time, the number of people choosing to work for themselves also rose, albeit by a smaller amount (+94,000).
Jobs growth concentrated in six sectors
Data from a separate survey of businesses released today sets out the number of jobs created in different sectors of the economy. Measures of jobs differ from counts of the number of people in employment as while a person can have more than one job, they are either in or out of work.
- As Exhibit 3 shows, six sectors were the main supporters of job creation in the third quarter of 2015. The top three job creating sectors were construction (+77,000), administrative & support services (+50,000) and agriculture, forestry & fishing (+44,000).
- In contrast, the number of jobs in human health & social work (-33,000), transport & storage (-20,000) and manufacturing (-10,000) declined.
- While jobs in human health & social work fell in the last quarter, it’s important to remember that this sector has been a key job creator over the course of the recovery. In the transport & storage sector an ageing workforce and ongoing skills shortages could be one of the reasons behind the decline in jobs. And, in manufacturing, the decline in jobs reflects, at least in part, a continued shift towards higher value added activities.
Significant employment growth in a handful of regions and nations…
Reflecting the strong rise in employment across the UK as a whole, the number of people in work increased in the majority of nations and regions in the three months to October.
- However, three regions saw particularly strong employment growth, namely the south east (+79,000), the north west (+50,000) and London (+43,000).
- Other locations seeing employment rise were the West Midlands (+22,000), the north east (+16,000), the East of England (+15,000), the south west (+11,000) and Northern Ireland (+9,000).
- Employment levels remained more or less unchanged in Scotland and Yorkshire & Humber (both +3,000) but fell in Wales (-16,000) and the East Midlands (-28,000).
…with declining unemployment similarly concentrated
- Similar to the picture on employment, while unemployment fell in two thirds of regions and nations, some areas saw more significant declines than others (Exhibit 4, overleaf).
- The largest decreases in unemployment in the three months to October were seen in the south east (-37,000) and East of England (-20,000).
- Other nations and regions seeing more gentle falls in unemployment were the East Midlands, north west and Wales (all -11,000), Scotland (-8,000), the south west (-7,000) and Yorkshire & Humber (-5,000).
- Unemployment was broadly similar in Northern Ireland (-1,000), the London and the West Midlands (both -3,000). In the north east unemployment rose a little.
Pay growth ticks down
While it is good to see that more people are in work and unemployment has been falling, the picture when looking at pay growth is less positive.
- Annual growth in regular pay, which excludes bonuses, in the private sector has been slowing since the spring and this month is no exception. In the three months to October, pay growth stood at 2.3%, down from 2.8% in the three months to September and down from 3.4% in the three months to May.
- This picture was reflected across a range of sectors. As Exhibit 5 shows, financial & business services saw the most significant slow down in the pace of annual growth in regular pay - a fall of 0.8 percentage points (pp) from the three months to September to the three months to October.
- The wholesaling, retailing, hotels and restaurants & the service sectors also saw the pace of pay growth slow (by 0.7pp and 0.5pp respectively).
- Growth in total pay, which includes bonuses, also eased. In the private sector, annual growth in total pay fell back from 3.4% in the three months to September to 2.7% in the three months to October. This reflects a fall in base pay as well as a slowing in the pace of growth of bonus payments.
- Boosting productivity remains the key to achieving sustainably faster pay growth. However, real incomes are still growing strongly as low inflation ensures pay packets stretch further at the till.
The next labour market update will be published on 20 January.
A CBI/Pertemps update will follow soon.
Follow us on LinkedIn: