Labour market update: No good news for young people

Analysis of today's Labour market statistics from the TUC's Richard Exell.

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Overall, today’s employment figures were good, with unemployment down and employment up.

Later in this post, I will focus on some problems, but I don’t want to be churlish, so let’s start with the good news.

Firstly, the number of people in employment in the 3 months March – May stood at 29,354,000, up 181,000 from December – February. The employment rate was 70.7 per cent, up 0.3 points.

Secondly, the unemployment level fell 65,000 to 2,584,000 and the unemployment rate fell from 8.2 to 8.1 per cent. The unemployment level fell for every age group except 18 – 24 year olds:

Unemployment, Mar – May, change from previous quarter, level (000s) and rate (%)

Age group Change in unemployment level Change in unemployment rate
16 – 17 – 12 – 1.7
18 – 24 + 2 =
25 – 34 – 19 – 0.3
35 – 49 – 13 – 0.1
50 – 64 – 22 – 0.3
65 + – 1 – 0.3
16 and over – 65 – 0.2

Other indications that the labour market improvement is real include:

• A fall in redundancies, with the level down 27,000 and the rate down 1.1 per cent;
• An increase in vacancies, up 3,000
• A fall in the number of unemployed people per vacancy from 5.7 to 5.5.

The labour market has been improving since last autumn, but the overall totals disguise some less encouraging trends:

• The 181,000 increase in employment includes a 42,000 rise in the numbers of government employment programmes;
•  And a 11,000 rise in the number of unpaid family workers;
•  The increase in gainful employment is therefore 128,000;
•  And 32,000 of that is in self-employment – earlier this year, the Chartered Institute for Personnel and Development noted that the increase in self-employment has been larger in industries where it is normally uncommon, suggesting that we are seeing a rise in ‘odd-jobbers’, most of whom “would take a job with an employer if only they could find one”;
• The number of part-time employees rose 20,000, so:
• The increase in full-time employees was just 76,000: 42 per cent of the headline total. It is still an increase on the quarter, but compared with a year ago, this figure is down 120,000.


See also:

Labour market statistics: Unemployment is falling, yet so are real wages 20 Jun 2012

Latest labour market stats are encouraging, but we should remain cautious 14 Mar 2012

Encouraging news on jobs, but far too early to call a labour market recovery 7 Mar 2012


The number of temporary employees fell by 14,000 but there was an increase of 5,000 in the number of temporary workers who wanted full-time jobs. With a 6,000 fall in involuntary part-time employment, underemployment (as measured by involuntary part-time workers + involuntary temporary employees) was essentially static.

Long-term unemployment continues to rise:

Long-term unemployment, Mar – May, change over the quarter and year

Change in unemployment level Over 6 months Over 12 months Over 24 months
Change on quarter – 72,000

(- 5.7%)

+ 7,000

(+ 0.5%)

+ 3,000

(+ 0.3%)

+ 18,000

(+ 4.2%)

Change on year – 18,000

(- 1.5%)

+ 150,000

(+ 12.0%)

+ 78,000

(+ 9.6%)

+ 57,000

(+ 14.9%)

Of course, long-term unemployment lags overall unemployment, which peaked in October. We would not expect that peak to be reflected in the over-6-months figures until the next set of data.

But the prospects for young people are more worrying. For one thing, youth unemployment may have followed the same pattern as the overall total, but the increase to last October was steeper and there has hardly been any decline since then:


Secondly, the increase in long-term unemployment has been much sharper for young people than for all adults:

Increase in long-term unemployment, 12 months to Mar – May, (%)

Over 6 months Over 12 months Over 24 months
16 + 10.8 9.7 14.8
18 – 24 35.0 33.5 38.0

Thirdly, worklessness – young people who are not in full-time education or employment – has been growing in recent months, both in absolute terms and as a share of the total 18 – 24 year old population:


The case for action to prevent the emergence of another lost generation is stronger than ever.

There is a real puzzle about how to square the overall positive labour market data with the dreadful figures for economic growth. After today’s figures came out, David Smith (the Economics Editor at the Sunday Times) tweeted:

Recession, what recession?

And you can see what he means. But today also saw the publication of the monthly summary of the reports by the Bank of England’s regional agents.

They talk to businesses at the grass roots and today’s round-up includes slowing consumer demand, a weakening housing market, positive but weakening investment intentions (with “a general sense of stepping back from expansion plans”), and private sector employers indicating they “did not expect much change in staff numbers over the next six months.”

The latest Purchasing Managers’ Indexes have found service sector growth “slumping to an 8 month low”, the “sharpest drop in construction output for two-and-half years” and conditions in manufacturing “fragile.” The Recruitment and Employment Confederation reported that “staff placements fall at fastest pace for almost three years.”

No wonder the Treasury round-up of independent forecasts for GDP found that these have fallen again, to an average of 0.1 per cent for 2012 and 1.4 per cent for 2013.

Or that the International Monetary Fund has cuts its projections for UK growth to 0.2 per cent in 2012 and 1.4 per cent in 2013 – the biggest downwards revision for an advanced economy.

I don’t want to sound like Eeyore, but I don’t think all this can be ignored. Part of the answer can be found in today’s productivity figures –output per hour, per worker and per job are stagnating and as a result unit labour costs are rising:

Productivity and unit labour costs, Q1 2012, per cent

Per cent change on quarter a year ago Average since Q1 1998
Output per worker 0.0 1.4
Output per job 0.0 1.5
Output per hour – 0.4 1.8
Unit labour costs 3.4 2.5

And remember that, by international standards, these long-run averages for increases in productivity are not brilliant. All this means that the positive labour market figures aren’t really sustainable. If productivity increases we’ll have growth without jobs; if it doesn’t we’ll have stagnation without jobs.

I hope I’m proved wrong.


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