Economic and Labour Market Review - January 2007

The Office for National Statistics (ONS) published the first edition of Economic and Labour Market Review (ELMR) of Monday the 15th of January 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.

Features in the January edition include:

• Official statistical publications and economic statistics;
• Earnings: summary of sources and developments; and,
• Time series analysis of the Labour Force Survey longitudinal data sets

In Brief and Economic Review

Public sector employment statistics
 
Improvement of public sector employment (PSE) statistics is a priority for government for a number of policy-related purposes, as highlighted by several government reports. In 2004, ONS launched a continuing development programme aimed at producing a single set of accurate figures for the public sector workforce and improving the frequency, timeliness, comparability and coverage of the statistics. Previously, most PSE statistics were available only on an annual basis and
they lacked coherence.
 
In 2005, ONS, in collaboration with other departments, implemented major improvements to PSE estimates. Standard definitions were agreed, in line with National Accounts concepts, and a single definitive set of quarterly PSE estimates introduced. A new Quarterly Public Sector Employees Survey of public sector organisations was established. ONS now publishes the official PSE estimates each quarter, as National Statistics, three months after the period to which they refer, at the same time as the release of other labour market statistics. Breakdowns by government sector and broad industry groups, back to 1991, and estimates of private sector employment are available.
 
Seasonally adjusted series (back to 1999) were introduced in November 2006. For other analyses of public sector employment, including regional breakdowns and analysis by characteristics such as occupation, age, ethnicity, disability and working hours, which are not available from the data collected from public sector organisations, it is necessary to make use of the Labour Force Survey. While this survey is the best source for many labour market statistics, there are limitations to the analysis of employment by sector and industry and approximate adjustments need to be made to the data. This is because individuals responding to the survey often find it difficult to give accurate details of their employers and their activity.
 
Plans for further improvements to the statistics include the full integration of the PSE estimates in the wider ONS employment and jobs statistical system and the provision of improved regional estimates, based on data provided by public sector organisations.
 
Inter-departmental task force on migration statistics
 
In May 2006, ONS set up an interdepartmental task force on migration statistics with other government departments. The objective of the task force was to recommend timely improvements that could be made to estimates of migration and migrant populations in the United Kingdom, both nationally and at local level, in advance of those that might flow from long-term strategic systems such as e-borders. The final report of the task force was published on 15 December 2006.
 
Understanding migration is vital to estimating the size and distribution of the population and how it is changing. For the last few years, migration has been the main factor affecting population numbers in this country. There is now a broad recognition that available estimates of migrant numbers are inadequate to meet all the purposes for which they are now required.
 
Work undertaken by ONS in recent years has identified some improvements that can be made quickly. These will be reflected in population figures to be published this year. The recommendations of the task force, if fully implemented, would lead to further improvements between 2008 and 2012. The actions recommended are designed to get better information about the complex area of migration and to deliver more timely, comprehensive statistics covering both long and short-term migration. Improvements to the following are proposed:

• port surveys
• population surveys and the Census
• timely access to administrative information
• better links between information from administrative sources
• better statistical techniques

By delivering these improvements, the aim would be to have:

• a more coherent picture of UK migration
• more reliable estimates of population and migration at regional and local levels
• information on short-term migrants (as migration estimates do not currently include figures on short-term migrants)
• statistics that more accurately relate intentions at entry to actual behaviour and to experience and events once in the country
• more comprehensive, timely and accurate figures on key migrant groups living in the country
• more timely and robust indicators of trends in migrant numbers

Employment level rose; unemployment level fell

In recent years the strength of the UK economy has been clearly reflected in the labour market statistics. However, in the last year or so there has been a degree of weakening in the labour market picture. As the labour market operates on a time lag, this could be perhaps put down to relatively weaker output and demand conditions prevailing in 2005. The latest figures from the Labour Force Survey (LFS) pertain to the three-month period up to October 2006 and show a mixed but a mostly positive picture. The number of people in employment rose. The number of unemployed people and the claimant count fell. Average earnings including and excluding bonuses was up. On the downside, the employment rate fell whilst the unemployment rate remained unchanged; vacancies fell.

The current picture of an increase in the number of people in employment and the fall in unemployment levels suggests strengthening demand conditions as reflected in buoyant GDP in 2006, is beginning to feed through to the relative pick up in the labour market. This may also imply a greater absorption capacity of the economy for workers. Looking at a detailed level, the increase in employment levels appears to be mainly generated by an increase in part-time and self-employment jobs offset by a fall in full-time employee jobs. This somewhat reverses the picture of the previous quarter where there was a concurrent increase in the employment and unemployment levels; explained partly by the fall in the inactivity rate.

The current working age employment rate is 74.5 per cent, in the three months to October 2006, down 0.1 percentage point from the three months to July 2006 and down 0.2 percentage points from a year earlier. The number of people in employment increased by 41,000 over the quarter and by 216,000 over the year, to leave the employment level standing at 29.00 million in the three months to October. The unemployment rate was 5.5 per cent, unchanged from the three months to July 2006 but up 0.6 percentage points from a year earlier (Figure 14). The number of unemployed fell by 7,000 from the three months to July but was up 197,000 from a year earlier to leave the unemployment level standing at 1.70 million.

According to the LFS, in the period August to October 2006, the number of people in employment increased by 41,000. In the same reference period, the number of people in employee jobs fell by 37,000 after rising by just 2,000 in the previous quarter. This was offset by a strong rise in the number of people in self-employment of 72,000, continuing the trend from the previous quarter. From another perspective, the number of people in full-time employee jobs fell by 93,000, whilst those in part-time jobs increased by 134,000, again, continuing the trend from the previous quarter.

Claimant count falls

The claimant count measures the number of people receiving the job-seekers allowance. The latest figures for November show the claimant count level at 950,800, down 5,700 on the month but up 49,500 on a year earlier. The claimant count rate in November 2006 was 3.0 per cent, unchanged from the previous month but up 0.2 percentage points from a year earlier.

Vacancies fall

There were 595,800 job vacancies on average in the three months to November 2006, down 12,200 from the previous three months but up 1,700 from the same period a year earlier.

Inactivity rate up

The working age inactivity rate was 21.0 per cent in the three months to October 2006, up 0.1 percentage point from the three months to July 2006 but down 0.3 percentage points from a year earlier. The number of economically inactive people of working age was up 38,000 over the quarter to leave the level standing at 7.84 million in the three months to October 2006. Over the year the number fell by 74,000. The largest increase in the inactivity rate occurred amongst those categorised as ‘looking after family/home’ which increased by 24,000 followed by the ‘retired’ category at 15,000 and the ‘student’ category at 7,000. This was offset by a fall in the inactivity rate of those categorised as ‘the long-term sick’. On an annual basis, inactivity fell by 74,000, with the largest fall being amongst the ‘long-term sick’ at 66,000, followed by the ‘other’ category at 48,000 and students at 33,000.

Average earnings rise

Average earnings growth, including and excluding bonuses, rose in the latest reference period. Average earnings growth, excluding bonuses, was 3.8 per cent in October, up 0.3 percentage points Average earnings growth, including bonuses, grew by a rate of 4.1 per cent, up 0.2 percentage points from the previous month. In terms of the public and private sector split, the gap in earnings growth excluding bonuses shows signs of widening in the recent month. The widening was due to an increase in private sector wages which grew by 3.9 per cent in October, up from 3.6 per cent in the previous month. Public sector wages on the other hand fell to 3.1 per cent, down from 3.2 per cent in October.

Overall, the numbers point to a slightly strengthening 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. The higher wage growth may partly reflect wage settlements being concluded on the basis of a higher Retail Price Index. 

Recent Releases

13 December 2006
 
Average earnings
 
Employment 
 
Public sector employment 
 
22 December 2006
 
Productivity

Forthcoming Releases

12 January
Annual Survey of Hours and Earnings (ASHE) – 2005 results (part 3)
 
17 January
Labour market statistics – January 2007
 
24 January
Average weekly earnings – November 2006
 
25 January
Monthly digest of statistics – January 2007