Today’s good employment news only deserves one-and-a-half cheers

There are more jobs, but the pay is lower, your chances of being underemployed are higher, your risk of losing your job is higher, and if you do become unemployed your chances of getting a job are lower.

Today’s employment figures are another mixed bag: there’s good news on the number of jobs, worse news on indicators of the quality of those jobs, especially pay.

But the good news is definitely good: firstly, the unemployment level fell 48,000 to 2,466,000, and the employment rate 0.2 points to 7.6 per cent. Unemployment is now below the level inherited from the last Labour government – though still well above the pre-recession level of a bit over 1.6 million.

Employment rose 177,000, to 29,953,000, another record high. There is a very strong chance it will pass the thirty million mark in December or January. But we have to remember that the working age population is still growing and although the employment rate rose 0.3 points to 71.8 per cent, it remains below the pre-recession level of 73 per cent.

There is good news on long-term unemployment: the number unemployed over 12 months is down 19,000 and there has been a 15,000 fall in the number unemployed over two years.

Youth unemployment is more of a mixed bag. The headline is a 9,000 fall on the quarter, but there are still 965,000 young unemployed people and this is higher than last month and the month before that. The number of young people unemployed over 12 months has grown 7,000 and the number unemployed over two years by 5,000.

For the third month running, women have gained less than men from the increase in employment: 47,000 to 130,000. The number of unemployed women is actually up 6,000 and women’s unemployment rate is up very slightly too (0.02 points).

Overall, however, the government will be happy with these numbers.

My favourite indicator of jobs strength – the ratio of unemployed people to job vacancies – has come down significantly, from 4.7 to 4.5. This is still higher than the 2.5 that was typical before the recession, but well down from the levels of 5.5 or higher that we saw as recently as March – May 2012. No wonder Bank governor Mark Carney said that, “for the first time in a long time, you don’t have to be an optimist to see the glass as half full.”

But the quality of the jobs our economy is creating is becoming a major worry. The most important indicator of weakness is pay: average Weekly Earnings (for regular pay) are increasing at an annual rate of just 0.8 per cent. This is well below the 2.2 per cent rate of the Consumer Price Index and the 2.6 per cent of the Retail Price Index. Average Weekly Earnings data go back to 2001 and they have never shown a lower annual rate of increase.

Underemployment continues to be a problem. We now have 1,457,000 part-time workers who say they took these jobs because they couldn’t get full-time work – the highest level of involuntary part-time work ever. There are over 600,000 involuntary temporary workers, down from the high of 660,000 a year ago, but still well above the 400,000 that was the norm before the recession.

It’s to get a handle on these job problems that goes beyond the headlines that the TUC has created a Job Quality Index. The JQI measures real wages and underemployment, relative to the situation in July 1992. A higher index indicates that people in work are likely to be more fully employed and enjoying better pay growth; a lower number suggests rising underemployment and weaker pay growth.

Richard Exell graph 1

From the mid-1990s, movements in the Index followed movements in the employment rate but this changed in 2011. Since then, the employment rate has risen while job quality has stagnated.

Another aspect of job quality – job insecurity – has also worsened since the recession. Last week, the Office for National Statistics published statistics on Moving between Unemployment and Employment, looking at flows between employment, unemployment and inactivity.

These figures allow us to look at the risk of unemployment for employed people, worked out by taking the number moving from employment to unemployment in one quarter and calculating it as a percentage of the total number of employed people in the previous quarter.

Richard Exell graph 2

Even though the risk of unemployment came down after the recession, it’s settled at a significantly higher rate than before. At the same time, unemployed people’s chances of getting a job have settled at a level about eight per centage points lower than before 2008.

Richard Exell graph 3

So today’s good news only deserves one-and-a-half cheers: there are more jobs, but the pay is lower, your chances of being underemployed are higher, your risk of losing your job is higher, and if you do become unemployed your chances of getting a job are lower. Really not all that brilliant.

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