Our labour market analysis

November 2016

Learning and Work Comment

See the analysis in one page here.

The labour market figures published on 16 November are another worrying set of numbers. Unemployment is down, but employment growth is decelerating and working age inactivity is up.

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

"The focus of today's headlines may be on the fall in unemployment to an 11 year low, but looking a little deeper into today's figures reveals a rather more concerning picture.

Quarterly employment growth has slowed again and between July and September was running at a third of the level seen in the spring and early summer. Looking at the data on flows in and out of employment shows that this is being driven by falling levels of hiring by employers, which have been declining since late 2015, rather than more people leaving employment.

The current Brexit related economic uncertainty is likely to be a continuing negative influence on employers' willingness to hire new staff. Today also saw the release of near flat flash estimates for productivity growth in the third quarter of 2016. Combining this with weak employment growth going forward points to an outlook of low UK economic growth.

Inactivity amongst people of working age rose in the quarter, the first rise for 15 months. This rise in inactivity could be a statistical blip, and we will be monitoring these numbers closely in the coming months as they could indicate that increasing numbers of people are moving further away from employment. The claimant count also rose by nearly 10,000 in October and has been on a rising trends since February and risen by 67,000 since then.

This worrying state of affairs also affects young people. While youth unemployment in the quarter is down, inactivity amongst young people is up and overall the number of young out of employment is up. Learning and Work's Youth Employment Convention coming up in December will examine employment prospects for young people in detail. Young people moving into the labour market are always likely to be the first affected by such changes, particularly as the changes are in hiring of new workers."

The claimant count figures in this report include for the first time claimants of Universal Credit in the full (digital) service. This means that figures for some areas have been extensively revised upwards. However, the figures include all Universal Credit claimants with full jobsearch requirements (which may include some in mini-jobs). JSA figures included some very low hour part-time workers, but JSA discouraged this practice while Universal Credit encourages it.

Employment rose by 49,000 between April to June 2016 and July to September 2016. In the last 12 months employment has grown by 461,000.

Unemployment fell by 37,000 between April to June 2016 and July to September 2016 and the unemployment rate fell 0.1 percentage points to 4.8% in the quarter the lowest level since 2005.

Economic inactivity rose by 49,000 between April to June 2016 and July to September 2016 and the inactivity rate rose 0.1 percentage points to 21.7% in the quarter.

The small 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 2,500 in the month to October, compared to the adjusted rise of 9,800. 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 risen. However, at 16.8%, it is still 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.

The proportion of unemployed young people (not counting students) who are not claiming Jobseeker’s Allowance and therefore are not receiving official help with job search is now 56.6% and has risen by more than 20 percentage points since October 2012.

A total of 65,000 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 18,000 this quarter. Self-employment fell 3,000 this quarter. Employee numbers rose 63,000 in the quarter.

Involuntary part-time employment fell this quarter by 6,000 to 1.1 million, 13.6% of all part-time workers. this proportion is 1.8 times that in 2004.

Key Facts

  • Unemployment is 1,604,000, down 52,000 from last month’s published figure (quarterly headline down 37,000) and the unemployment rate is 4.8%, down 0.1 percentage points on last month and down 0.1 percentage points on last quarter.
  • The number of claimant unemployed is 803,300, up 9,800 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 1,022,000, up 1,000 on the quarter, representing 14.2% of the youth population (up 0.1 percentage points).
  • Youth unemployment (including students) is 591,000, down 36,000 on the quarter.
  • There are 2.1 unemployed people per vacancy. Learning and Work Institute estimates this figure may rise next month.
  • The employment rate is 74.5% (no change on last month’s published figure and no change on the preferred quarterly measure).