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Labour Market Report

Issue #1 - March 2010

This is our first monthly Labour Market report, which replaces our Recession Report series. In addition, we will be producing a wider ranging bi-monthly Economic Report - the first edition of which will be available in early April.

The latest labour market figures show that:

• Between November - January 2010 2,449,000 people were unemployed by the ILO measure, this was down 33,000 on the previous quarter (August-October), and up 383,000 on the year.
• During the same period, both men's and women's unemployment levels fell (by 20,000 and 13,000 on the quarter respectively)
• Vacancy levels were steady between January and February 2010. While vacancy levels remain low relative to the last decade this is unsurprising given the changed economic circumstances. Levels have shown some recovery in recent months and are now comparable to those of Feb 2009.
• Redundancies continued to fall, by 22,000 on the quarter (November-January 2010). Redundancies have now been falling for three consecutive quarters.
• Between January and February the claimant count fell by 32,300. In addition, last month's claimant count figures have been revised and the widely reported 23,500 increase between December and January has been reduced to 5,300. The fall between the first months of 2010 was the largest reduction since November 1997.
• Monthly data show that ILO unemployment for young people has been slowly falling for three consecutive months - youth unemployment in December (715,000) was 34,000 less than in September.
• Employment has continued to fall, by 54,000 between November - January and August - October. However, the pace of the reduction is beginning to slow, and this fall is taking place at an earlier point in the economic cycle than was the case in previous downturns. In addition, the extent of the fall is far less than in previous recessions. This is shown below:

Employment levels (LHS, 000s) and rates (RHS), working age population (16-64 (men) and 16-59 (women), Jan 1980 - Dec 2009

• Long-term unemployment is rising for all age groups, as can be seen below:

Unemployment of over 12 months (000s) by age, April 1992 - December 2009

• This is however unsurprising - the large increases in the numbers of people who lost their jobs in late 2008 mean that consequent increases in the numbers of people who are long-term unemployed 12 months were always very likely. As the chart below shows, the increase in short-term unemployment peaked in Q3 of 2008, and it is therefore as expected that the rate of increase in unemployment of over 12 months may have peaked a year later.

Level of increase in ILO unemployment of up to six months (LHS) and in unemployment of over 12 months (RHS) (000s) Q1 2007 - Q3 2009

• Levels of economic inactivity rose 149,000 on the quarter, and have increased 371,000 on the year. While this is a cause for concern, the main reason for the rise is that both the numbers and the proportions of people who are economically inactive as a result of being students are rising (by 1.4 points and by 265,000 on the year respectively). The proportion looking after a home/family has, so far, continued to fall, as has the proportion of those who are economically inactive as a result of long-term sickness. This trend partly illustrates rising student numbers, and is also partly a result of lower numbers of students being in paid employment. This is shown below:

Percentage of economically inactive people by reason for economic inactivity, Q2 1993 - Q2 2009

• Overall these figures demonstrate that the labour market remains some way off a full recovery. Compared to the levels of the last decade unemployment remains high and under-employment (as we have reported elsewhere) is still rising, causing significant personal and financial difficulties for many thousands of households across the UK. However, in comparison to previous recessions labour market performance is significantly better than could have been expected at this point in the economic cycle. While there has been much media focus on the negative indicators (e.g. rising levels of economic inactivity and long-term unemployment) the reality behind these trends is that in the main they are also more positive than seemed likely 12 months ago.

Report (700 words) issued 22 Mar 2010