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Employment has recovered from the recession, but wages haven’t

14 November 2012

Today’s employment figures don’t contain much new to shout about. The number of people in work — although it rose by 100,000 on the previous quarter — is actually down very slightly from last month’s record high (but still above the pre-recession peak, just). Unemployment fell by 49,000 from Q2 to Q3, although that’s well within the Labour Force Survey’s margin of error (so we can’t be certain that it fell at all). The best news in today’s figures — from the government’s point of view — is probably that the headline unemployment rate is now 7.8 per cent, very slightly below the 7.9 per cent rate when the coalition took office (though again, it’s worth remembering that the margin of error on that figure is +/– 0.3 percentage points).

The big picture, then, is the same as last month: overall employment has fully recovered from the recession. But the composition of the labour force has changed dramatically. The government can boast that there are 601,000 more people in work now than were at the last election, but almost half of that increase has come in part-time workers:

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In fact, 621,000 fewer people are working full-time than were in April 2008, and 625,000 more are working part-time. Despite that, the total number of hours worked has risen by 3.2 per cent — from 915.9 million a week in May 2010 to 945.3 million now — and is also back to pre-recession levels. That’s because both full-time and part-time workers are working more hours a week on average (the average full-time worker now puts in 37 hours and 32 minutes a week, compared to 37 hours and 4 minutes before the recession).

But it seems people are working longer for less. Earnings have failed to keep up with inflation: the average rose by 1.7 per cent in the last year, while prices went up by 2.2 per cent (by CPI) and 2.6 per cent (on RPI). Average earnings are now 7 per cent lower in real terms than they were five years ago:

This is further evidence that, as Citi’s Michael Saunders argued in September:

‘The resilience of employment is not a sign of hidden economic strength: in aggregate, people are pricing themselves into work through weakness in pay and the shift to less secure and less well paid forms of work (self-employment, part-time work, temporary jobs).’

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  • TomTom

    Simply increase Tax Credits to boost Demand since most extra members of the workforce depend on WFTC and Housing Benefits to make ends meet the Government will simply have to boost Welfare payments for those in work to boost domestic Demand. Maybe raising Corporation Tax will be the means to pay for it, but the simple fact is that most of those working have no disposable funds

  • Hannah Scott

    Personally I don’t ever attribute much of consequence to employment statistics. They are rolled out to suit whatever argument is convenient at the time. Opinion seems to be divided pretty evenly here however, interesting viewpoints too:

  • dorothy wilson

    Employment has recovered but wages haven’t – any connection between the two?

    • HooksLaw

      Good point well made, Dot.

  • Paul R

    “Employment has recovered.” Really!!! Somebody’s kidding themselves over that one, they certainly are not kidding me, or indeed, anybody else with half an active brain cell.
    Just watch what happens once those temp’, part-time Christmas jobs get chopped at the end of December. Plus, how many of those jobs are also voluntary jobs with charitable outlets. I hear they have been included in the figures.
    I don’t know! There are some poor deluded fools in Westminster.

  • Chris lancashire

    Anecdotally my company’s experience supports the above. We are now just entering the third year of a salary and wage freeze – I am hopeful of ending that in the next couple of months. However our overall employment has fallen by around 10% largely through natural wastage.
    Would that the public sector would learn the same restraint. Unfortunately they do not have to live by the discipline that you only pay out what you earn.

    • Tam

      My public sector experience is that we’ve had a wage freeze for 3yr with little or no prospects of an increase in the near to medium term. Employee numbers down 10-15% mainly through natural churn. The unions might be bumping their gums but most workers have accepted the need for the measures with little complaint. However the constant demands from central government for local government to do more with less whilst complying with a never ending list of requirements, standards and other government initiatives (ministerial pet projects) are stretching things pretty thinly now.

      • HooksLaw

        Your point about ever more standards is a fair one. we and the ever growing line of pressure groups should realise that these things can only be afforded by wealth. we are not wealthy we are being squeezed, squeezed because the economy shrank by 7% in the recession. The mad burgers who run the Eurozone are not ,making it easy for anybody to recover from the crash.

      • Seepage

        If the public sector can lose 15% of its workforce in a couple of years through ‘churn’ it tells you only one thing – it was vastly over-staffed.
        With public sector pensions adding 25% to the value of such jobs over the private sector, there is a long way to go before parity and value for money.

        • HooksLaw

          Reducing the payroll is an important factor in bringing down the pensions liability. But its a fair point that a smaller public sector should aim to do less.

  • HooksLaw

    People want to keep their jobs, employers want to keep their workers. There is nothing unusual in this.
    These figures show that there is a complete disconnect between those saying saying we are in a recession.

    UK car sales continue to ‘surge ahead. Sales are 4% up on the same period last year and Septembers figures were 8% up. New car registrations have grown every month bar one this year. Meantime European sales fall.

    Perhaps you do not quote this because it does not suit your message.

    We are currently recovering from a shocking and deep recession. The world is still plagued by lack of growth.
    What do you want and indeed what do you expect?

    • telemachus

      What we want and what we expect Hook is Growth.
      Not rising inflation as we heard yesterday
      Not a 621,000 less in full time work as we heard above
      Not the double dip recession stoked unnecessarily by Osborne
      We heard last month of plans to build for growth
      So why does the Chancellor not listen?

      • HooksLaw

        Why do you ‘expect’ growth. Did King Canute turn back the tide. What you expect is endless rabbits out of hats, endless bootstrap spending, endless windfalls from the magic money tree.
        The nation is shackled by debt and deficits thanks to your labour. The nation cannot afford the spending you crave and has to wean itself off it now.

        Your fondness for ‘double dip’ seems to forget that the first dip, a massive cliff in fact, was given to us by Brown, so come of your sanctimonious high horse – we only climbed allegedly out of that thanks to massive but supposedly temporary stimulus, ie even more spending we could not afford.

        • telemachus

          Correction the first recession came from the US and was associated with banking collapse from which Gordon saved the Western world

          • telemachus

            And Hook for your other point you are like Osborne naive to the point of stupidity.
            Osborne’s recession denied the tax receipts needed to reduce the deficit and pay back the debt
            Stoking growth by limited pump priming will engineer self fulfilling growth that will get government receipts rolling in.
            What we need is vision

            • HooksLaw

              Your notion is so accurate that the IMF regularly support… Osborne’s policy.
              Gordon Brown spent 10 years pump priming us into this mess. A massive crash was not Browns fault, but ‘Osborne’s recession’ is all his? A massive near to home Eurozone sovereign debt crisis might be a small contributing factor.

              Your notion of self fulfilling growth is absurdly crass. As it happened Brown spent 10 years of growth continually running deficits and adding to the debt. Your notion fails by every examination.

              • telemachus

                latest pronouncements of Lagarde are urging growth now

          • HooksLaw

            The recession came from the US?
            Why did our banks nearly collapse then? The notion that the recession came from the US is risible. Our banks bought sub prime loans over a number of years. They are also in hock to sovereign debt. As ever totally delusional propaganda.

    • TomTom

      European Car Sales slump because Dealers are no longer registering them because the pipeline is stuffed full as in the USA and China. You will find UK car statistics are quirky too – Daimler Benz has a profit figure 1 billion Euros below target and is cutting costs – that is the top end of the market. Ford is a disaster and GM is merging with Peugeot to make a bigger dog. We are NOT in “recession” – we are in DEPRESSION and it will continue for another 2-3 decades as it is a New Way of Life following the British Credit Boom unleashed by its Offshore banking sector

      • telemachus

        The GM Peugeot tie up has been shelved because of the usual frog self seeking

  • William Blakes Ghost

    But it seems people are working longer for less.

    Yep because lots of those high quality technology, financial and professional jobs have disappeared and been replaced by low quality service industry jobs.

    • hexton

      To say nothing of the many employees at the middle grades, pressurised into putting in a lot of unpaid overtime.

      • rubyduck

        The ‘middle grades’ in the private sector have been putting in lots of unpaid overtime for as long as I can remember

  • True Bred Pomponian

    I stopped being an unemployment statistic last month, not because I had found work, but because my JSA had run out and I already have 30 years NI contributions. The nice lady at the Jobcentre told me I was wasting my time signing on. She was right, so I stopped. Her and the Government’s objective is to make the unemployment figures look better than they are. Don’t be fooled by falling unemployment figures.

    • HJ777

      You’re right – you will disappear from the claimant count unless you qualify for means-tested JSA. It is a scandal.

      However, the more widely accepted measure of unemployment is the Labour Force Survey, which gives a higher figure and does not depend on whether you are able to claim benefits.

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