Economic and Labour Market Review - May 2007

The Office for National Statistics (ONS) published Economic and Labour Market Review (ELMR) on Monday the 14th of May 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

Regional statisticians

ONS has established regional statisticians in each of the nine English regions in April. The Allsopp Review (2004) recommended that ‘There should be a significant ONS or GSS presence in each English region’ to fulfil a role similar to that of statisticians already serving the devolved administrations in Scotland, Wales and Northern Ireland.

Regional development agencies (RDAs) have collectively provided £1 million in funding to provide the resource for ONS regional statisticians in Newcastle, Warrington, Leeds, Birmingham, Nottingham, Cambridge, London, Guildford and Exeter. One regional statistician and one regional analyst will be based in each region where they will provide data, analysis and advice to their specific region, improving the evidence base for regional policy making and feeding back regional intelligence to ONS. There will be an evaluation during the first year to monitor progress and demonstrate benefits to both ONS and the regions.

The National Statistician, Karen Dunnell, will host a national launch of the regional statistician teams in Birmingham on 14 May, with addresses also by John Healey MP (Financial Secretary), Christopher Allsopp and David Marlow (Chief Executive, East of England Development Agency). A series of regional articles is being been produced for publication at the launch, to provide a statistical picture of the English regions and describe regional trends over recent years. These articles will cover a broad range of topics: economic, demographic, social and the regional policy agenda in both the UK and the European Union (EU), including reference to Structural Funds. New sub-regional productivity analysis for gross value added per filled job based on published data is being introduced and an update is to be provided on the progress of the Allsopp recommendations.

Annual reviews of claimant count and vacancy survey series

ONS has conducted its annual review of both the claimant count and vacancy survey series.

Claimant count

Every year, the seasonal adjustment of the claimant count stock and flows series is reviewed. Each series is reviewed over a period of time (usually ten years’ back series) to determine the type of adjustment to be used, identifying the seasonal pattern, and investigating any other effects in the data that are not strictly seasonal. Factors used to adjust for the seasonal pattern are updated monthly by the adjustment program. The program used for seasonal adjustment of the main claimant count series is X11 Arima. An enhanced version, X12 Arima, is used for the seasonal adjustment of the claimant count stock series, by age and duration. This year’s review has resulted in minor modifications to model settings and to Easter priors.

The claimant count series were revised back to January 2004 and the revisions to the series are generally small. The full article on the latest seasonal adjustment review of claimant count series is available on the National Statistics website at the address given below.

Vacancy survey

Every year ONS reviews and updates both the quality of the data and the seasonal adjustment used to produce the vacancy survey series, which comprises monthly and rolling quarterly data. The non-seasonally adjusted series has been reviewed to incorporate information from late returns, or corrections to earlier returns, into the back series. This year unadjusted figures have been revised back to January 2004.

ONS also reviews the seasonal adjustment on an annual basis. Now that the data series are over five years old, a comprehensive review of all the seasonally adjusted series has been possible for the first time. This year’s review has resulted in modifications to the seasonal adjustment modelling options for the majority of series. Multiplicative decompositions have been adopted for all seasonally adjusted series and ARIMA models have now been introduced (vacancy survey data are seasonally adjusted using X12 Arima).

Figures have been revised back to the beginning of the series, April 2001. Revisions resulting from these reviews have been relatively small and had no impact on the assessment of trends. The full article on the review of vacancy survey data and seasonal adjustment can be found on the National Statistics website at the address given below.

Trade union membership 2006

In the quarter ending December 2006, the rate of union membership (union density) for employees in the UK fell by 0.6 percentage points to 28.4 per cent, from 29.0 per cent in autumn 2005. This was the largest annual percentage point decline since 1998. The rate of union membership among all workers was 25.8 per cent, a decrease from 26.2 per cent in autumn 2005.

Union density is higher for women than for men for the third consecutive year, and higher for older employees. More than a third of employees aged 35 and over were union members, compared with a quarter of those aged between 25 and 34. Full-time employees were more likely to be union members than part-time employees, at 31.0 and 21.2 per cent respectively. There are large differences in union density among employees in the nations: the highest was in Northern Ireland (39.7 per cent) and the lowest was in England (27.0 per cent).

There are also regional differences in the proportion of employees who are union members. Union density ranged from 21.4 per cent in the South East to 38.9 per cent in the North East. The data are derived from the Trade Union Membership 2006 report published by the Department of Trade and Industry (DTI) on 19 April 2007. The source of the data is the Labour Force Survey, which has collected data from individuals on whether they are trade union members in the autumn quarter since 1992, and previously collected the information in the spring quarter from 1989 to 1991. The Certification Officer for Trade Unions and Employers’ Associations provides a second source of data which goes back to 1975. This is available from the DTI’s website.

Labour market activity weakens

The Labour market in the latest reference period showed a mixed picture, but overall, there appears to be signs of weakening, somewhat reversing 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. Whether this downturn is a temporary blip or signals something much more significant remains to be seen.

The latest figures from the Labour Force Survey (LFS) pertains to the three month period up to February 2007 and mostly shows a negative picture. The number of people in employment fell as did the employment rate. The number of unemployed people and the unemployment rate increased. On the upside, the claimant count fell. Job vacancies increased. Average earnings, excluding bonuses remained unchanged, while average earnings including bonuses rose; 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, 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 February 2007, down 0.2 percentage points from the three months to November 2006 and from a year earlier.

The number of people in employment fell by 47,000 over the quarter, but was up 147,000 over the year, to leave the employment level standing at 28.98 million in the three months to February 2007. The unemployment rate was 5.5 per cent, in the three months to February 2007, up 0.1 percentage point  from the three months to November 2006 and up 0.3 percentage points from a year earlier (Figure 14). The number of unemployed people rose by 21,000, from the three months to November, and increased by 120,000 from a year earlier, leaving the unemployment level standing at 1.69 million.

According to the LFS, in the period December to February 2007, the number of people in employment fell by 47,000. The decrease was led by a fall in employees of 69,000 offset by an increase in self employment of 30,000. From another perspective, the number of full-time employees fell by 11,000, whilst part-time employees fell by 36,000, the latter reversing the recent trend of increases in part-time employees.

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 shed 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 March showed the claimant count level at 910,800, down 9,200 on the month and down 28,000 on a year earlier. The claimant count rate in March 2007 was 2.9 per cent, unchanged from the previous month and down 0.1 percentage point from a year earlier.

Vacancies rise

There were 635,500 job vacancies on average in the three months to March 2007, up 33,500 from the previous three months and up 45,800 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 February 2007, up 0.2 percentage point from the three months to November but down 0.1 percentage points from a year earlier. In level terms, the number of economically inactive people of working age was up 76,000 over the quarter to leave the level standing at 7.93 million in the three months to February 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 58,000, followed by the ‘long-term sick’ category up 20,000 and the ‘temp-sick’ category up 13,000. This was partially offset by a fall in those categorised as  ‘other’ up 24,000. On an annual basis, inactivity rose by 17,000, with the largest rise being amongst those categorised as ‘student’ up 28,000, followed by the ‘discouraged workers’ category up 13,000. This was partially offset by inactivity falling amongst those categorised as ‘looking after family/home’ down 35,000.

Average earnings remain subdued

Average earnings growth showed a mixed picture in February 2007, but the underlying picture is still that of relative weakness. Average earnings (including bonuses) increased in the latest reference period. It rose by 0.4 percentage points to 4.6 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 remained unchanged from the previous month at 3.6 per cent. 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 increase supply in the labour force.

Characteristics of Public Sector Workers

This article presents analysis of public sector employment, and makes comparisons with the private sector, using data from the Labour Force Survey. It looks at characteristics which differentiate people employed in these sectors, comparing proportions of public and private sector workers in different groups: by sex, age, ethnicity, disability, full and part-time working, usual hours worked, job tenure, union membership, occupation and level of qualifications. The article also explains some of the limitations of the data used and the methodology used to derive the estimates.

Revisions to Workforce Jobs

This article explains the revisions made to the workforce jobs (WFJ) series, released on 14 March 2007, in the Labour Market Statistics First Release. It was originally intended to release these revisions in December 2006 but further quality assurance was required. This quality assurance has now been concluded and a Review of Workforce Jobs Benchmarking has been published separately, which includes a comparison of annual growth in jobs as measured by the revised WFJ series and the Labour Force Survey.

Regional economic indicators May 2007, with a focus on sub-regional household income

This quarter, regional economic indicators (REI) focuses on sub-regional household income in light of the latest published data. The headline indicators provide the underlying picture of regional economic performance, productivity and welfare.  Labour market data and indicators of factors that drive productivity are also included. This article covers the nine English  Government Office regions, Northern Ireland, Scotland and Wales: the European Nomenclature of Units for Territorial  Statistics (NUTS) level 1 regions of the UK. The term ‘region’ is used for convenience.

Recent Releases

18 April
Average earnings - Bonuses increase pay growth in the year to February

Employment - Rate falls to 74.3% in three months to February 2007

19 April
Union membership - Union density down slightly in 2006

30 April
Local employment - Highest rate of 90.1% in South Northants
Local inactivity - Lowest rate of 3.8% in West Oxfordshire
Local unemployment - Lowest rate of 1.8% in Eden, Cumbria

Forthcoming Releases

16 May
Labour market statistics – May 2007

17 May
Effect of taxes and benefits on household income
Public and private sector breakdown of labour disputes

22 May
Average weekly earnings – March 2007
Index of labour costs per hour – Q1 2007

25 May
Monthly digest of statistics – May 2007