Our labour market analysis

March 2017

Learning and Work Comment

The labour market figures published on 15 March are another set of numbers pointing to modest improvement in employment prospects.

Duncan Melville, Chief Economist at Learning and Work Institute, commented: 

"At first sight the rise in employment of 92,000 for the period November 2016 to January 2017 is an acceleration on the experience of recent months. However, this rise is driven by a significant monthly fall in employment dropping out of the comparison to be replaced by a modest monthly increase in employment. Vacancies continue at around 750,000, so our expectation is for continued modest employment growth. 

Unemployment is down again this month and the unemployment rate is now at its lowest level for 42 years. Despite this fall in unemployment, average earnings growth (excluding volatile bonuses) fell to 2.3%. So, there are no signs, as yet, of inflationary pressures emerging from the labour market. This lends credence to the Bank of England's view, as set out in last month's Inflation Report, that there is scope for unemployment to fall further. However, with slow growth expected this year and next (the Treasury's latest survey of independent forecasters, also published today, suggests growth of 1.7% this year and 1.3% in 2018) it is more likely that unemployment will rise somewhat over the next two years than fall further. 

In this release, the Office for National Statistics has stopped reporting the claimant count of unemployed Universal Credit and Jobseeker's Allowance claimants. The ONS continue to produce the figures, but do not include them in their report. We have included them in this analysis, but the reasons that led the ONS to withdraw them apply to our analysis as well. 

In the Jobseeker's Allowance data, claims are counted from the first day of a claim, while in the Universal Credit data, people are not counted as a 'start' until they have accepted a 'claimant commitment' following a meeting with Jobcentre Plus. This means that the regular peak of new claims (when people are let go after Christmas/sales jobs) in early January is shown in the JSA figures in January and in the Universal Credit ones in February. This means that the ONS attempts to identify actual change rather than regular seasonal patterns (seasonal adjustment) has been thrown off. ONS will be trying to revise this next month. 

The overall effect is that we are not confident that the very sharp fall in the claimant count shown in last month's figures and continued in this month's ones are actually genuine falls, or just a change in the way patterns of claims are reflected in the administrative data. We continue to estimate future unemployment and vacancies per unemployed person using these figures, but we recommend a higher than usual degree of caution. 

Paul Bivand, Learning and Work AD for Statistics and Analysis said: "The new claims figures for Universal Credit (and to a lesser extent Jobseeker's Allowance) are particularly important as they are the first labour market figures to show the signs of any economic shocks. In the current Brexit and Trump-related uncertain times for employment and trade, it is vital that we have clear sight of any large and unexpected changes. It is therefore unfortunate that we have large and annually repeated shifts in the claimant count due to these administrative changes." 

Employment rose by 92,000 between August to October 2016 and November 2016 to January 2017. In the last 12 months employment has grown by 315,000. 

Unemployment fell by 31,000 between August to October 2016 and November 2016 to January 2017, and the unemployment rate fell by 0.1 percentage points to 4.7% in the quarter the lowest level since 1975. 

Economic inactivity fell by 34,000 between August to October 2016 and November 2016 to January 2017. The inactivity rate fell 0.1 percentage points to 21.6% in the quarter, a new record low. 

The fall in the claimant count attempts to take account of normal seasonal effects but adjusted figures are not published for local areas. The actual number of claimants, nationally, rose by 29,200 in the month to February, compared to the adjusted fall of 11,300. Therefore, it should not be surprising that figures for local areas will show rises compared to the national picture. 

The proportion of people leaving Jobseeker's Allowance (or the ‘leavers rate’) has risen very slightly. At 17.0%, it is now well below the level in early 2015 of 20.7%. The number of new claims has fallen. Jobseeker’s Allowance off-flow rates for JSA claimants of short durations increased. Off-flow rates remain at historically high levels.

Youth unemployment is showing a quarterly fall. There are still 554,000 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 neither claiming Jobseeker’s Allowance nor Universal Credit and therefore are not receiving official help with job search is now 52.4%. 

A total of 91,000 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 rose 23,000 this quarter. Self-employment rose 49,000 this quarter and remains at a record proportion of employment. Employee numbers rose 17,000 in the quarter. Involuntary part-time employment fell this quarter by 87,000 to 1.1 million, 12.8% of all part-time workers.The proportion remains well above the 7.4% minimum, in 2004.

Key Facts

  • Unemployment is 1,584,000, down 13,000 from last month’s published figure (quarterly headline down 31,000) and the unemployment rate is 4.7%, down 0.1 percentage points on last month and down 0.1 percentage points on last quarter.
  • The number of claimant unemployed is 734,700, down 11,300 on last month, and the claimant rate is 2.1%.
  • The number of workless young people (not in employment, full-time education or training) is 1,003,000, down 36,000 on the quarter, representing 14.0% of the youth population (down 0.5 percentage points).
  • Youth unemployment (including students) is 554,000, down 33,000 on the quarter.
  • There are 2.1 unemployed people per vacancy. Learning and Work Institute estimates this figure may fall next month.There are 2.1 unemployed people per vacancy. Learning and Work Institute estimates this figure may fall next month.
  • The employment rate is 74.6% (no change on last month’s published figure and up 0.2 percentage points in the preferred quarterly measure).