Our labour market analysis

May 2018

Learning and Work Comment

The labour market figures published on 15 May provide present a very positive picture of the UK labour market with a strong rise in employment, and falling unemployment and economic inactivity in the latest quarter.

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

The increase in employment between the first quarter of 2018 and the last quarter of 2017, at 197,000, is very strong and the largest quarterly increase for two and a quarter years. Unemployment and economic inactivity are both down. The employment rate is at a record high, the unemployment rate is at its lowest level since 1975 and the inactivity rate is at a record low. Added into the mix is the second month’s figures of positive real wage growth with increasing wage growth of 2.9% outstripping inflation.

Looking at the composition of the rise in employment, around two thirds of the growth is accounted for by an increase in full-time employment and one third due to part-time employment. While the numbers of people involuntarily working in temporary or part-time jobs because they cannot find a permanent or full-time job are up - by 17,000 and 25,000 respectively, together these account for just a fifth of the overall increase in employment. Self-employment fell by 33,000 in the quarter which could reflect a decline in entrepreneurialism, or alternatively some unwinding of dubious employment practices by employers in the Gig Economy. While the number of unpaid family workers fell by 23,000 and the number of government trainees by 17,000. Overall, it would be difficult to argue, from the composition of the change in employment, that this quarter’s very strong rise in employment is down to a growing number of ‘bad jobs’.

This very positive labour market picture stands in contrast with the outturns for claimant unemployment and economic growth. The number of claimant unemployed is up again this month - by 31,000 between March and April, and by 105,000 in the year to April 2018. Economic growth in the first quarter of 2018 was at 0.1% the weakest growth outturn for six years. While one should raise a glass and toast today’s noteworthy labour market figures, we should perhaps be wary that we do not get a hangover tomorrow. ’

Paul Bivand, Learning and Work AD for Statistics and Analysis said:

"The claimant count of unemployed benefit claimants is clearly the odd indicator out this month, rising while other measures are showing improving trends. Universal Credit is designed to increase jobseeking activity among previously economically inactive groups, but this is not showing up in increasing ILO (survey) unemployment, as we would expect."

Employment increased by 197,000 between October to December 2017 and January to March 2018. In the last 12 months employment rose by 396,000.

Unemployment fell by 46,000 between October to December 2017 and January to March 2018. and the unemployment rate decreased by 0.2 percentage points to 4.2% in the quarter the lowest level since 1975.

Economic inactivity reduced by 115,000 between October to December 2017 and January to March 2018. and the inactivity rate has fallen by 0.3 percentage points to 21.0% in the quarter, a new record low.

The national claimant count is up by 31,200. This takes account of normal seasonal effects but adjusted figures are not published for local areas. The actual number of claimants, nationally, has risen by 32,200 in the month to April. Therefore, it should not be surprising that figures for local areas may show larger increases compared to the national picture. L&W's own seasonally adjusted estimate rose less, by 21,500. L&W's estimates are currently more effective at smoothing out normal seasonal changes than the ONS estimates.

The proportion of people leaving the claimant count (or the ‘leavers rate’) has risen. At 14.5%, it is still well below the level in early 2015 of 18.1%. The number of new claims has fallen. Jobseeker’s Allowance off-flow rates for JSA claimants of short durations fell again.

Youth unemployment is showing a quarterly fall. There are still 531,000 unemployed young people, and 356,000 (5.0% 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 Universal Credit orJobseeker’s Allowance and therefore are not receiving official help with job search is now 52.3%.

A total of 57,000 were counted as in employment while on ‘government employment and training programmes’, where the Office for National Statistics continues to count employment programme participants as ‘in employment’ by default. This number fell 17,000 this quarter. Self-employment fell 33,000 this quarter. Employee numbers rose 271,000 in the quarter. Involuntary part-time employment rose this quarter by 25,000 to 1 million, 12.0% of all part-time workers.The proportion remains much higher than the 7.4% in 2004.

Key Facts

  • Unemployment is 1,425,000, it has risen by 1,000 from last month’s published figure (quarterly headline is down by 46,000) and the unemployment rate 4.2%, showing no change on last month and down by 0.2 percentage points on last quarter.
  • The ONS figure for claimant unemployed is 897,000, increased by 31,200 on last month, and the claimant rate is 2.5%.
  • The number of workless young people (not in employment, full-time education or training) is 1,009,000, up 6,000 on the quarter, representing 14.3% of the youth population (up by 0.1 percentage points).
  • Youth unemployment (including students) is 531,000, down by 16,000 on the quarter.
  • There are 1.7 unemployed people per vacancy. Learning and Work Institute estimates this figure may rise slightly next month.
  • The employment rate is 75.6% (up by 0.2 percentage points on last month’s published figure and rose by 0.4 percentage points in the preferred quarterly measure).