Economic and Labour Market Review - June 2007

The Office for National Statistics (ONS) published Economic and Labour Market Review (ELMR) on Monday the 11th of June 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

Local area labour markets

The latest local area labour market data show that the area with the highest employment rate was South Northamptonshire (90.1 per cent) while the lowest rate was in Tower Hamlets (52.9 per cent). There is a considerable variation within each region. For example, in the region with the highest average, the South East, employment varies between 88.7 per cent in West Oxfordshire and 68.3 per cent in Thanet.

The area with the highest unemployment rate in October 1995 to September 2006 was Tower Hamlets (13.7 per cent), while the lowest rate was in Eden, Cumbria (1.8 per cent). Again, there were considerable variations within regions. In the region with the lowest average rate, the South West, unemployment varied between Purbeck (2.3 per cent) and Plymouth (6.5 per cent). London had the highest average rate (7.9 per cent), but individual boroughs varied between Tower Hamlets (13.7 per cent) and Richmond upon Thames (4.8 per cent).

The latest estimates of jobs density (2005) show there were 0.84 jobs per working-age resident in the UK. London had the  highest jobs density at 0.93 compared with 0.74 in the lowest region, the North East. The local area with the highest jobs density was the City of London, with almost 50 jobs per working-age resident, while the lowest was in Chester-le-Street, North East, and Carrickfergus, Northern Ireland, both with 0.39 jobs per resident.

People who work in the City of London had the highest earnings, with median full time gross pay of £883 a week as at April 2006. The lowest pay was for people who work in Torridge, South West, at £306 a week. The report, ‘Local area labour markets: Statistical indicators April 2007’, was published on the National Statistics website on 30 April 2007. It also contains sections looking at economic inactivity, ethnicity and the labour market, claimants of Jobseeker’s Allowance (the claimant count), and earnings by place of residence. It brings together data from a number of different sources – the Annual Population Survey, Annual Business Inquiry, Annual Survey of Hours and Earnings, and administrative data on benefits from the Department for Work and Pensions – to give an overall picture of the labour market looking at both labour supply and demand in each area.

Also available are spreadsheets giving data for key indicators such as employment, unemployment, economic inactivity, claimant count and jobs for both local authorities and parliamentary constituencies.

Pension statistics in the Annual Survey of Hours and Earnings

One of the recommendations of the Review of ONS Pension Contributions Statistics (2002) was to use the New Earnings Survey (NES) to collect pension contributions data. At around the same time, the Review of Statistics on the Distribution of Earnings (2002) made several recommendations for improving NES that resulted in the new Annual Survey of Hours and Earnings
(ASHE) being introduced in 2004.

A new questionnaire was introduced in 2005 for ASHE, which gave the opportunity to improve existing questions as well as to add new questions on pension contributions. The questionnaire allowed improved information to be collected regarding the type of pension provision that employees had in place with their employer, as well as the level of contribution being made by the employer and employee into this pension scheme.

As is normal practice with ONS surveys, individual responses are validated against a set of criteria to identify large errors that may impact on results. In addition, the aggregate results from the survey have been compared with other data sources such as the Occupational Pension Scheme Survey and HM Revenue and Customs data.

The questionnaire collects data on amounts contributed to pensions but it was decided to publish information on contribution rates. Employee and employer contribution rates are derived by dividing pensionable pay by employee and employer contribution amounts, respectively.

The tables published give breakdowns of employees by pension type and contribution rate bands for employee and employer contributions. Within these breakdowns, separate tables further break down the data by age group and earnings, industry and
earnings, occupation and earnings, and size of employer and earnings.

The first set of 2005 results were published in summer 2006. These results were then revised alongside the release of the 2006 results in April 2007. Part of the revision to the 2005 results included improvements to the individual responses based on information from the 2006 returns.

The ASHE pensions tables, along with other ASHE analyses, are available from the National Statistics website.

Labour market activity still fairly buoyant

The Labour market in the latest reference period showed a mixed picture. There appears to be some signs of weakening in the Labour market. This somewhat reverses the recent trend of fairly strong growth in labour market activity; as a result of a feeding through of fairly strong demand conditions from the beginning of 2006 into a strengthened labour market picture.

Overall however, the labour market can still be considered as remaining rather buoyant, with employment and unemployment at fairly stable levels compared to the beginning of the year. Taking all the indicators together, the picture remains inconclusive as to suggest the labour market was entering a looser period.

The latest figure from the Labour Force Survey (LFS) pertains to the three month period up to March 2007 and mostly showed a mixed picture. The number of people in employment fell as did the employment rate. The number of unemployed people increased. On the upside, the unemployment rate was unchanged. The claimant count fell. Job vacancies increased. Average earnings, excluding bonuses was up, while average earnings including bonuses fell; but overall, average earnings remain subdued with weak real wage growth.

Looking at a detailed level, the fall in the employment level appears to be mainly driven by a fall in employees, particularly part time employees, offset by an increase in the number of people in self-employment. The current working age employment rate was 74.3 per cent, in the three months to March 2007, down 0.2 percentage points from the three months to December 2006 and down 0.3 percentage points from a year earlier. The number of people in employment fell by 55,000 over the quarter, but was up 93,000 over the year, to leave the employment level standing at 28.98 million in the three months to March 2007. The unemployment rate was 5.5 per cent, in the three months to March 2007, unchanged from the three months to December 2006 and up 0.3 percentage points from a year earlier (Figure 14). The number of unemployed people rose by 13,000, from the three months to December, and increased by 101,000 from a year earlier, leaving the unemployment level standing at 1.70 million.

According to the LFS, in the period January to March 2007, the number of people in employment fell by 55,000. The decrease was led by a fall in employees of 100,000 offset by an increase in self-employment of 45,000. From another perspective, the number of people in full-time employment rose by 3,000, whilst people in part-time employment fell by 58,000.

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 (up 51,000) followed by construction (up 21,000) and distribution, hotels & restaurants (up 19,000). Two sectors recorded a fall in jobs. Manufacturing continues to shed jobs, with a decrease of 23,000 in the latest period followed by other services (down 4,000). Over the year, education, health and public administration saw the largest increase in jobs at 96,000 followed by finance & business services (up 95,000). The manufacturing sector in contrast lost over 53,000 jobs on the year, followed by distribution hotels & restaurants (down 8,000).

Claimant count falls

The claimant count measures the number of people claiming the Jobseekers Allowance. The latest figures for April showed the claimant count level at 890,000, down 15,700 on the month and down 57,100 on a year earlier. The claimant count rate in April 2007 was 2.8 per cent, virtually unchanged from the previous month and down 0.2 percentage points from a year earlier. The discrepancy between the rise in unemployment and the fall in the claimant count can partly reflect reluctance by people losing jobs to claim Jobseekers Allowance and/or people not being eligible.

Vacancies rise

The number of vacancies created in the UK continued to show a healthy demand position for the economy, and appears to belie the weakness of the labour market in respects to other indicators, namely employment and unemployment. It may simply be the case that there is a mismatch between skills and vacancies and/or it could be an indication of the time lag in filling vacancies. There were 638, 600 job vacancies on average in the three months to April 2007, up 32,100 from the previous
three months and up 50,900 from the same period a year earlier.

Inactivity level rises

The working age inactivity rate was 21.2 per cent in the three months to March 2007, up 0.2 percentage points from the three months to December and up 0.1 percentage points from a year earlier. In level terms, the number of economically inactive people of working age was up 85,000 over the quarter to leave the level standing at 7.94 million in the three months to March 2007. There were inactivity increases amongst most categories over the quarter. The largest increase in inactivity level occurred amongst those categorised as ‘student’ which increased by 53,000, followed by those categorised as ‘looking after family/home’ (up 29,000) and the ‘long-term sick’ category (up 14,000). On an annual basis, inactivity rose by 78,000, with the largest rise being amongst those categorised as ‘student’ (up 27,000), followed by the ‘retired’ category (up 22,000). This was partially offset by inactivity falling amongst those categorised as ‘long-term sick’ (down 7,000).

Average earnings remain subdued

Average earnings growth showed a mixed picture in March 2007, but the underlying picture is still that of relative weakness. Average earnings (including bonuses) decreased in the latest reference period. It fell by 0.1 percentage points to 4.5 per cent. Average earnings growth (excluding bonuses) in contrast increased from the previous month by 0.1 percentage point to 3.7 per cent in March. In terms of the public and private sector split, the gap in wages widened. Average earnings (excluding bonuses) grew by 3.1 in the public sector, unchanged from the previous months and grew by 3.8 per cent in the private sector, up 0.1 percentage points from the previous month.

Despite the weakening in labour market activity in the latest period, overall, the numbers still point to a fairly buoyant labour market, although it is still loose compared to previous years, with employment levels at relatively high levels and unemployment at a fairly stable level. This is consistent with higher workforce participation rates, underpinned by robust GDP growth. Average earnings show stable but fairly modest growth, consistent with increased supply in the labour force.

Features

Labour Disputes in 2006

In 2006, 754,500 working days were lost in the UK from 158 stoppages of work arising from labour disputes. This article analyses the three main measures of labour disputes – working days lost, stoppages and workers involved – by industry, region, cause, size and duration. The statistics are put into context by considering estimates of working days lost per 1,000 employees and working time lost through strikes as a proportion of time actually worked.

Data are taken from a number of sources, including regular centralised returns from some industries and public bodies, as well as directly from the employer or trade union involved after the Office for National Statistics has been notified of a dispute from press reports.

Issues in the Measurement of Low Pay

The UK uses two major surveys to produce low pay estimates; the official ASHE measure and supplementary LFS measure. The differences between these measures have been accepted as a consequence of the different survey methods and purposes.

This article describes three related investigations into these differences. The first shows how the timing of measurement is important and suggests evidence of non-compliance. The second examines the perceived inaccuracy of responses in household surveys and how this affects LFS low pay estimates. The third shows that the measure of hourly rate used can explain much of the difference between the estimates. This work supports the current methods for generating low pay estimates and highlights the need for an awareness of these background issues when interpreting the estimates.

Recent Releases

16 May
Average earnings - Bonuses increase pay growth in the year to March
Employment Rate falls to 74.3% in three months to March 2007

Forthcoming Releases

13 June
Labour market statistics – June 2007

Public sector employment – Q1 2007

14 June
Public and private sector breakdown of labour disputes

20 June
Average weekly earnings – April 2007

26 June
Monthly digest of statistics – June 2007

30 June
Labour disputes – 2006