Our labour market analysis

September 2017

Learning and Work Comment

The labour market figures published on 13 September provide a distinct feeling of deja vu as they show another strong increase in employment combined with falling unemployment and falling economic inactivity amongst people of working age. However, it is also the case that workers are getting poorer with real wages falling for the fifth month in a row. .
Duncan Melville, Chief Economist at Learning and Work Institute, commented: 
‘This is the Bill Murray in Groundhog Day labour market: employment growth in the quarter was again strong and exceeded 100,000 for the fifth consecutive month. Unemployment and levels of inactivity amongst people of working age both fell. The latter recording the largest fall since the autumn of 2015. The working age employment and inactivity rates again reached record highs and lows respectively, and the unemployment rate fell to 4.3%, the lowest level since the spring of 1975. Vacancy levels appear to have stabilised at around 775,000. 
Annual wage growth (regular pay excluding bonuses) was 2.1% in the three months May to July 2017. However, this is below the current inflation rate and real wages declined, by 0.4%. Thus, while the news on employment, unemployment and economic inactivity is all positive, the continuing downside is that workers are getting poorer. Declining real wage growth goes hand in hand with poor productivity growth in the UK. The reasons behind the UK's poor productivity performance are multifarious, the need for: better infrastructure, higher rates of business investment, more innovation and research and development activity, but skills also lies at the heart of this problem. In particular, the UK needs to improve the provision and acquisition of a very wide range of skills from basic skills of numeracy, literacy and IT capabilities through to technical skills and the ability to acquire skills throughout an individual's lifetime not just in childhood and during their years as a young adult.’ 
Employment rose by 181,000 between February to April 2017 and May to July 2017. In the last 12 months employment has grown by 379,000. 
Unemployment fell by 75,000 between February to April 2017 and May to July 2017. and the unemployment rate was down by 0.3 percentage points to 4.3% in the quarter the lowest level since 1975. 
Economic inactivity fell by 107,000 between February to April 2017 and May to July 2017. and the inactivity rate fell 0.3 percentage points to 21.2% in the quarter, a new record low. 
The small fall 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, rose by 1,500 in the month to August, compared to the adjusted fall of 2,800. Therefore, it should not be surprising that figures for local areas will show rises compared to the national picture. 
The proportion of people leaving the claimant count (or the ‘leavers rate’) has fallen. At 15.9%, it is now well below the level in early 2015 of 18.8%. The number of new claims has fallen. Jobseeker’s Allowance off-flow rates for JSA claimants of short durations increased. Off-flow rates are rising to levels shown in previous administrative failures or recessions. 
Youth unemployment is showing a quarterly fall. There are still 528,000 unemployed young people, and 348,000 (4.9% 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 and therefore are not receiving official help with job search is now 53.8%. 
A total of 76,000 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 11,000 this quarter. Self-employment rose 43,000 this quarter and neared the record proportion of employment. Employee numbers rose 147,000 in the quarter. Involuntary part-time employment rose this quarter by 21,000 to 1.1 million, 12.5% of all part-time workers.The proportion remains nearly double that in 2004.

Key Facts

  • Unemployment is 1,455,000, and fell by 28,000 from last month’s published figure (quarterly headline down by 75,000) and the unemployment rate is 4.3%, down 0.1 percentage points on last month and down 0.2 percentage points on last quarter.
  • The number of claimant unemployed is 806,300, down 2,800 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 954,000, up 1,000 on the quarter, representing 13.4% of the youth population (up 0.1 percentage points).
  • Youth unemployment (including students) is 528,000, down 36,000 on the quarter.
  • There are 1.9 unemployed people per vacancy. Learning and Work Institute estimates this figure may fall slightly next month.
  • The employment rate is 75.3% (up 0.1 percentage points on last month’s published figure and up 0.5 percentage points in the preferred quarterly measure).