Economic and Labour Market Review - April 2007

The Office for National Statistics (ONS) published Economic and Labour Market Review (ELMR) on Monday the 16th of April 2007. The ELMR replaces Labour Market Trends and draws together expert research and analysis to build an up-to-date, comprehensive and unique statistical picture of the UK economy and labour market.

ELMR includes impartial commentary and analysis from its specialist ONS authors, illustrated with tables, charts and diagrams. It provides an independent, cohesive view of the state of the economy and the labour market, and gives an insight into how the statistics behind the analysis are produced and interpreted.

In brief and Labour Market Review

Labour market activity remains robust

The Labour market showed a mixed picture in the latest reference period, but overall, continued the recent trend of fairly strong growth in labour market activity of the recent previous months. This follows the looser conditions prevalent in earlier quarters. As the labour market operates on a time lag, this could be perhaps due to the pick up in demand conditions in 2005 quarter four beginning to feed through into a strengthening labour market picture.

The latest figures from the Labour Force Survey (LFS) pertain to the three-month period up to January 2007 and show a mostly positive picture. The number of people in employment rose. The number of unemployed people fell. The claimant count fell. Job vacancies increased. On the downside, the employment rate fell whilst the unemployment rate remained unchanged. Average earnings, excluding bonuses fell, while average earnings including bonuses rose; but overall, average earnings remain subdued with weak real wage growth. The concurrent rise and fall in the employment and unemployment levels may be partially attributed to higher workforce participation levels. Looking at a detailed level, the increase in employment levels appears to be mainly generated by an increase in the number of people in self-employment.

The current working age employment rate was 74.4 per cent, in the three months to January 2007, down 0.1 percentage point from the three months to October 2006 and from a year earlier. The number of people in employment increased by 18, 000 over the quarter, and by 221,000 over the year, to leave the employment level standing at 29.02 million in the three months to January 2007. The unemployment rate was 5.5 per cent, in the three months to January 2007, unchanged from the three months to October 2006 but up 0.4 percentage points from a year earlier (Figure 14). The number of unemployed people fell by 3,000, from the three months to October, but increased by 151,000 from a year earlier, leaving the unemployment level standing at 1.69 million. According to the LFS, in the period November to January 2007, the number of people in employment increased by 18,000. The increase was driven by a rise in self-employment of 26,000 offset by a contraction in employees of 15,000. From another perspective, the number of full-time employees fell by 28,000, whilst part-time employees increased by 13,000, continuing the trend from the previous quarter.

Workforce jobs rises

According to employer surveys, there was an increase of 88,000 jobs in the three months to December 2006. Most sectors showed increases in jobs over the quarter and year. The largest quarterly contribution came from an increase in finance & business services jobs at 51,000 followed by construction at 21,000 and distribution, hotels & restaurants at 19,000. Two sectors recorded a fall in jobs. Manufacturing continues to shred jobs, with a decrease of 23,000 in the latest period followed by other services at 4,000. Over the year, education, health and public administration saw the largest increase in jobs at 96,000 followed by finance & business services at 95,000. The manufacturing sector in contrast lost over 53,000 jobs on the year, followed by distribution hotels & restaurants at 8,000.

Claimant count falls

The claimant count measures the number of people claiming the jobseekers allowance. The latest figures for February showed the claimant count level at 922,200, down 3,800 on the month and down 2,800 on a year earlier. The claimant count rate in February 2007 was 2.9 per cent, unchanged from the previous month and from a year earlier.

Vacancies rise

There were 622,800 job vacancies on average in the three months to February 2007, up 24,800 from the previous three months and up 19,700 from the same period a year earlier.

Inactivity level rises

The working age inactivity rate was 21.1 per cent in the three months to January 2007, up 0.1 percentage point from the three months to October but down 0.3 percentage points from a year earlier. In level terms, the number of economically inactive people of working age was up 42,000 over the quarter to leave the level standing at 7.88 million in the three months to January 2007. There were inactivity increases amongst most categories over the quarter. The largest increase in the inactivity rate occurred amongst those categorised as ‘student’ which increased by 31,000, followed by the ‘temp sick’ category at 22,000 and the ‘retired’ category at 12,000. This was partially offset by a fall in those categorised as ‘other’ at 23,000, followed by those categorised as ‘looking after family/home’ at 14,000. On an annual basis, inactivity fell by 71,000, with the largest fall being amongst those categorised as ‘long-term sick’ at 46,000, followed by those ‘looking after family/home’ at 43,000.

Average earnings remain subdued

Average earnings growth showed a mixed picture in January 2007, but the underlying picture is still that of relative weakness. Average earnings (including bonuses) increased in the latest reference period. It rose by 0.2 percentage points to 4.2 per cent. This can mainly be attributed to the timing of bonuses payments, coinciding in the latest reference period. Average earnings growth (excluding bonuses), in contrast fell by 0.1 percentage point in January 2007 compared to the previous month to leave the rate standing at 3.6 per cent.

In terms of the public and private sector split, the gap in earnings growth, excluding bonuses, showed signs of narrowing. Private sector wage growth was 3.7 per cent, down 0.2 percentage points from the previous months while public sector wage growth was 3.1 per cent in the three months to January, unchanged from the previous month.

Overall, the numbers point to a fairly buoyant labour market, although it is still loose compared to previous years, with employment increasing due mainly to higher activity rates, which is consistent with robust GDP growth. Average earnings show stable but fairly modest growth, consistent with increase supply in the labour force.

Measuring low pay: the importance of timing

Recently the Labour Force Survey (LFS) has moved from reporting on a seasonal to calendar quarter basis. This article uses data on both bases to demonstrate how timing can affect low pay estimates, particularly when the survey period and changes in the National Minimum Wage (NMW) do not coincide. The number of low paid can vary considerably over a year. Looking at the changes in responses throughout the year shows some evidence of non-compliance and different patterns of implementing the NMW according to firm size.

International comparisons of labour disputes in 2005

This article continues a regular series on international labour disputes and presents data on labour disputes in member countries of the European Union and the Organisation for Economic Co-operation and Development, between 1996 and 2005. Comparisons are made of overall strike rates between countries as well as strike rates by industry. The article also describes the differences in definitions and coverage of the statistics between countries and how they affect comparability

Recent Releases

14 March

Average earnings - Pay growth steady in the year to January 2007
Employment - Rate falls to 74.4% in three months to January 2007
Public sector employment - Employment falls in Q4 2006

27 March

Regional household income - Highest per head in Inner London in 2005

28 March

Productivity - Productivity growth falls in Q4 2006

Forthcoming Releases

18 April
Labour market statistics – April 2007

19 April
Public and private sector breakdown of labour disputes - Trade union membership – 2006

25 April
Monthly digest of statistics – April 2007