Labour market still marked by serious weakness

The latest labour market statistics show some encouraging signs, but the headline figures disguise serious weakness.

pay growth

The latest labour market statistics showed that unemployment fell by 4,000 and the unemployment rate (now the focus of the Bank of England’s attention) remained steady at 7.8%.

Employment rate rose by 0.1% to 71.5% with 69,000 more people in work, however more than half of this increase was in part-time work.

The broad picture of the labour market remained consistent with that of recent months – a few encouraging signs but still marked by serious weakness.

Much attention will no doubt be placed on the earnings figures, which at first glance, seem to show some encouraging signs.

The growth of total earnings (as measured by the standard three month average period on the same period last year) rose by 2.1%. That is still well below inflation but would represent the fastest earnings growth in over two years.

However there is a real need for caution in looking at this data.

Regular pay growth is running at only 1.1% (compared to RPI of 3.1%) whilst bonuses payments soared in April, seriously distorting the three month average figures.

The reason for this soaring of bonus payments is not hard to find – the pre-announced cut in the 50p rate of tax to 45p. This has had the effect of moving income from the end of the previous financial year into the current one, depressing the earnings figures for the first part of this year and boosting them for them now.

Looking at regular pay growth (and so excluding the impact of bonuses) the picture is much clearer:

If anything regular pay growth appears to have slowed since 2012.

The ONS itself today notes that:

“The relatively high growth rate for April to June 2013 partly reflects unusually high bonus payments in April 2013. Some businesses have reported that they [hadn’t] paid bonuses in March last year but in April this year.”

This is something the Bank of England also anticipated in its most recent Inflation Report, arguing that:

“The reduction in the top rate of UK income tax is one factor that helps to explain the pattern of both bonus payments and regular pay growth since the beginning of 2013. In March 2012, it was announced that in April 2013 the top rate of income tax would fall from 50% to 45%.

“It is likely that some individuals were able to defer earnings that they would have otherwise received in 2013 Q1 to take advantage of that tax change. Based on Bank staff estimates, it is plausible that underlying private sector regular pay growth has remained close to 1% since the start of the year.

“So although measured private sector regular pay growth is likely to pick up in Q2, almost all of that pickup may be the result of this effect unwinding. The MPC expects four-quarter regular pay growth of around 1% on average in 2013 H2.”

It would appear that for most the real squeeze in earnings is continuing whilst a few at the very top have managed to game the tax system to boost their take home pay even further.

Real household disposable income was still below its pre-recession peak in the first quarter of this year. At a comparable point in the 1990s recovery it was up 12%. Today’s figures once again demonstrate that for most people, this doesn’t feel like a recovery.

One Response to “Labour market still marked by serious weakness”

  1. worldcitizen55

    Just reading thru’ a few articles & comments on here.

    Seriously, when are you on the mainstream ‘left’ going to stop defining your economics policy entirely with the strictures & failed & false macro & monetary ‘theory’ of the neo-liberal paradigm?

    By adopting the same rationale as the neo liberal Tories you have become, as epitomised by ‘New Labour’ merely a Tory lite movement.

    I note amongst the latest even-more-Tory-than-the-Tories efforts, Ed Balls’ version of a ‘Job Guarantee’. How f*^&ing dare he use the same terminology as MMT? When he is frankly merely promoting a precursor to fascist forced labour scheme? As in ‘compulsory’, & probably not even full time & even allowing the private sector to get such workers for nothing, competing on a fully subsidised wage for 18 months & then likely on a lower wage. Everything about Balls’ JG scheme weakens & denigrates both the low paid & unemployed – in all but name joining in with the Tories’ narrative that the problem is lazy people (demand side) not the reality – lack of jobs (supply side).

    So, just to be clear, MMT’s Job Guarantee could not be more different. For a start – no compulsion whatever – ever. Forced work is slavery – period.

    Next is that MMT’s JG is not a free gift for private business – or public sector employers who would equally exploit workers. It does not compete with private or normal public sector jobs. The work is done for the community & charity – non profit – sector alone. To fill in all those ‘helping hands’ type activities as & when JG workers are available. The roles are not permanent – the JG jobs are ‘transition’ jobs. Their purpose is to offer better income for those out of normal work than unemployment benefit – which also acts as a much better aggregate demand ‘automatic stabiliser’. And to maintain current work activity, references & value to potential employers when normal vacancies arise again. And to do this whilst providing some tangible benefits to society. The jobs are always paid the statutory minimum wage and are full time only. At minimum wage they will not compete with normal jobs – JG workers will naturally move to normal jobs for higher wages when the economy upturns & they become available. But they will help to eliminate the exploitation by employers who pay less than legal minimum to desperate workers with no other choice.

    JG jobs will rise and fall in counter cycle to the natural swings of the economy. The neo liberal, Tory mantra is that ‘markets’ & the private sector can provide if the pesky government get out of the way. Ok then. MMT’s Job Guarantee says money-where-your-mouth-is-please. If the right wing EMH dogma is true, there won’t be anyone wanting a minimum wage JG job, will there?

    So what’s not to like? Except….how is it paid for?

    Well, if you still insist on talking out the neo liberal arse instead of using your own faculties, it should be obvious that the country always have more people working. Yes, and working in ‘normal’, real goods & services producing jobs. Because even if you regard the JG activities as not of ‘value’ (even that is arguable), the higher level of automatic stabiliser income (vs benefits) being spent into the economy will provide for a higher number of normal jobs. You know, macro 101. Someone’s spending is always someone elses’s income (& job! whoda thort…).

    Still in neo liberal Tory arse paradigm…. the BoE as central bank & currency +issuer+ can always dictate the level of interest paid on government ‘borrowing’ – which is never needed to be repaid (only rolled over) because it is the Debt/GDP +ratio+ which represents the real cost. This is the essence. Sovereign fiat, non-convertible currencies have no bond ‘vigilantes’ – except by political spin & scam – only willing customers always wanting a high amount risk-free deposit facility. Ask yourselves, neo liberal ‘left’ numpties – why are banks etc. still queueing up for US, £, Yen Tsy bonds which are actually losing money in real terms – interest now paying vs inflation? Hmmm, not curious? So, numpties, play some ‘independent’ (read, run by banksters) BoE/Central Bank/Fed charade by government permission if you want to, but realise there is never any constraint to government spending more than it taxes (in its own currency). Ah…but won’t there be +some+ limit…? No, because ‘macro’ is circular – not like your f&$%ing household, dummy. Where will that spending end up? Eventually in the very hands of those banks etc. that need somewhere risk free to deposit it!!

    So, there is only one constraint for government – not like a f&^%ing household, neo liberal left dummies. Inflation. That’s it. Up to the point where goods & services are ready & available for purchase – in the currency of issue – then no inflation (above the normal background stuff, imported oil etc. which is beyond your control). Try to buy scarce goods – inflation. That’s all the government – or any other spending ‘actor’ needs to know. (Money supply, money multiplier etc. etc. – all bullsh1t – go read the MMT blogs to find out why, and how banking & money really works. It’s there deep in little publicised papers from BIS, Central Banks as well.)

    However, if we want choose facilities & operational options that are already present in our sovereign, fiat, non-convertible, floating currencies, then there is no actual need for a government to provide deposit facilities to banks (or ‘borrow’, if you insist on neo liberal arse paradigm mode). It’s +issuer+ of currency, remember? Only two thing required – a keyboard & computer linked to the ‘clearing bank’ system (they already have this!) and a glance at the inflation barometer, preferably the one for the sector where the spending is headed.

    So, back to the unemployment and MMT’s JG. No problem financing it ever – by definition, the unemployed volunteering for JG are ‘available’ resources to be bought.

    Now…when JG folk spend their wages, just like ANY spending in the economy, if there aren’t enough items available to meet demand, inflation is a risk. But this situation is no different to the present. Besides the inefficient, profit gouging gift for banks & rent seekers, dictating interest rates, there is the option to use taxation far more intelligently to dampen inflation on a sector basis, as decided on a democratic basis by parliament. Or to create inflation, oh, say, in order to inflate the price of a scarce asset class like property in order to futher enrich a chosen demographic.

    Bottom line – spending (from gov) adds money into the economy – taxation takes it away (destroys money).

    Neither the JG, nor MMT, makes any prescription in this area, save the JG. And all that does is help to maximise the production of real goods and services at any point in the ebb and flow of total output.

    So what’s it to be ‘lefties’? More neo liberal arse mode fascism-lite, or educating yourselves in the fact that the very reason Thatcher (& most politicians) spend millions spreading the ‘TINA’ mantra is because there most certainly IS an alternative to divide-and-rule, race to the bottom socio pathic cr@p peddled by so called ‘left’ & ‘right’ alike these days?

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