Our labour market analysis

July 2017

Learning and Work Comment

The labour market figures published on 12 July are encouraging for individuals' job prospects with a strong increase in employment, and unemployment and economic inactivity amongst people of working age falling. However, people in work are getting poorer with real wages continuing to fall.
Duncan Melville, Chief Economist at Learning and Work Institute, commented:
"Employment growth in the three months from March to May 2017 strengthened further on previous months and reached 175,000. Unemployment and levels of inactivity amongst people of working age both fell. The working age employment and inactivity rates reached a record high and low respectively, and the unemployment rate fell to 4.5%, the lowest level since 1975. Despite the current uncertain economic and political climate, the overall labour market is performing strongly.
The ONS have this month revised its seasonal adjustment of the claimant count. In contrast, with the above survey based numbers these new numbers show a notable increase in claimant unemployment of just under 50,000 in the four months to June 2017. The latest month here is later than any month counted for the survey estimates. Although on a quick look we continue to have some concerns about the precise patterns shown by these seasonally adjusted numbers they do look far more plausible than the previous set of numbers. Hence, these claimant count numbers may either be a herald of worse numbers to come in future months or indicate a disconnect between the strong performance of the labour market and trends for claimant unemployment. We have suggested that DWP focus on their support for JSA and UC unemployed claimants may be being distracted by the roll out of Universal Credit.
Annual wage growth has picked up slightly to reach 2.0% in the three months March to May 2017. However, this increase has not been sufficient to offset rising inflation and real wages fell for the third month running. The absence of pay pressures despite the tight labour market will add support to those on the Bank of England's Monetary Policy Committee arguing against raising interest rates.
The above combination of high employment but declining real pay points to the need to focus on the quality of work as well as the quantity. That is the focus of the Taylor Review published yesterday and the Learning and Work Institute has published a number of responses to this which will be added to over the next few days."
Employment rose by 175,000 between December 2016 to February 2017 and March to May 2017. In the last 12 months employment has grown by 324,000.
Unemployment fell by 64,000 between December 2016 to February 2017 and March to May 2017 and the unemployment rate fell 0.2 percentage points to 4.5% in the quarter the lowest level since 1975.
Economic inactivity fell by 57,000 between December 2016 to February 2017 and March to May 2017 and the inactivity rate fell 0.1 percentage points to 21.5% in the quarter, a new record low.
The rise in the claimant count takes account of normal seasonal effects but adjusted figures are not published for local areas. The actual number of claimants, nationally, fell by 11,500 in the month to June, compared to the adjusted rise of 6,000. Therefore, it should not be surprising that figures for local areas will show falls compared to the national picture.
The proportion of people leaving the claimant count (or the ‘leavers rate’) has fallen. At 16%, it is now well below the level in early 2015 of 19%. The number of new claims has fallen. Jobseeker’s Allowance off-flow rates for JSA claimants of longer durations increased. Off-flow rates remain at historically high levels.
Youth unemployment is showing a quarterly fall. There are still 562,000 unemployed young people, and 365,000 (5.1% of the youth population) who are unemployed and not in full-time education.
The proportion of unemployed young people (not counting students) who are not claiming Jobseeker’s Allowance or Universal Credit and therefore are not receiving official help with job search is now 55.3%.
A total of 72,000 were counted as in employment while on ‘government employment and training programmes’, where the Office for National Statistics continues to count Work Programme (etc.) participants as ‘in employment’ by default. This number fell 21,000 this quarter. Self-employment rose 13,000 this quarter. Employee numbers rose 189,000 in the quarter. Involuntary part-time employment fell this quarter by 27,000 to 1 million, 12.1% of all part-time workers. The proportion remains nearly double that in 2004. 

Key Facts

  • Unemployment is 1,495,000, has fallen by 36,000 from last month’s published figure (quarterly headline down by 64,000) and the unemployment rate is 4.5%, down 0.1 percentage points on last month and down 0.2 percentage points on last quarter.
  • The number of claimant unemployed is 829,000, up 6,000 on last month, and the claimant rate is 2.3%.
  • The number of workless young people (not in employment, full-time education or training) is 965,000, down 14,000 on the quarter, representing 13.6% of the youth population (down 0.1 percentage points).
  • Youth unemployment (including students) is 562,000, up 4,000 on the quarter.
  • There are 1.9 unemployed people per vacancy. Learning and Work Institute estimates this figure may rise slightly next month.
  • The employment rate is 74.9% (up 0.1 percentage points on last month’s published figure and up 0.3 percentage points in the preferred quarterly measure).