Lower unemployment and more full time jobs

3D Employment GraphRecently I wrote about challenging Labour’s narrative on unemployment with the facts. Since then, the points made in that article have been confirmed with even stronger jobs growth, lower unemployment, and a greater still proportion of full-time jobs.

Updates of those figures, and figures used in this article are summarised here drawn from data in here. The number of new, net, full-time jobs is now up to 1.3 million, and David Blunkett’s post-Soviet style meltdown more distant than ever.

I dealt in that article with zero hours and our relative performance against other economies. Three other questions are often raised, in an attempt to find a shred of bad news among the good: youth unemployment, long-term unemployment, and regional imbalance.

Taking the last first, unemployment is down in every region over the last year, by between 0.5% and 2.4%, with London somewhere in the middle at 1.2%. (Sheet 18(1) – this data only goes back 1 year).

Youth unemployment (16-24 year olds): this is a long standing problem – it has risen from 18.6% around the start of 2002, to 24.2% pre-crash and 36.2% in May 2010. This suggests that even in the good times there was a lack of investment in skills, and other labour market challenges, which will take some turning around. The rate has now started to drop and stands at 34.6% – still a long way to go. (ONS table A06)

Finally on long-term unemployment, there are levels given on sheet 9 of the ONS A01 spreadsheet for 6-12 months, 12 months+ and 24 months +. All are now falling, but only the first two are yet below the May 2010 level.

It is easy to get a little lost in all these numbers, but they illustrate an important point. There is such strong growth in employment in the economy that not only is headline unemployment going down, but unemployment is also going down among some of the more challenging groups, and in all parts of the country.

Perhaps somebody will find a subgroup of a subgroup in which unemployment is rising – that is fairly standard political use of statistics – but the lengths you have to go to to find that subgroup would just illustrate how encouraging the overall picture is.

Our opponents now have little choice but to grudgingly accept and welcome that unemployment is falling, and that they were wrong to predict the opposite, and are turning instead to wages and the cost of living.

Broadly speaking, a growing economy is reflected in some combination of three things: increasing wage rates, increasing employment, and increasing profits. Profits are fairly stable although not back to pre-crash levels – and the expectation of future profits is a vital ingredient for investment and growth. This leaves employment growth as the main beneficiary of economic growth rather than wage rates. This is for the better, at least for the time being because unemployment is far more devastating to people than wage restraint.

Of course we would like to see wages recover and we should expect it to happen as the economy continues to grow, and it is right for the government to be increasing the personal tax allowance to help with the cost of living. But unless you have a magic bullet for economic growth, or you intend to hammer profits at the cost of investment and jobs in the future, it is better to welcome jobs for the jobless than demand more pay for those in work.

* Joe Otten was the candidate for Sheffield Heeley in June 2017 and Doncaster North in December 2019 and is a councillor in Sheffield.

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24 Comments

  • Release the trolls!

  • Great news having suffered unemployment in my working life I know how soul destroying it can be. However my only concern is are these genuine jobs paying a good wage to live on? But in principal employment is better for the mind and body so good news

  • Charles Rothwell 18th Jul '14 - 12:43pm

    Well said. This is the kind of good news/positive achievement which needs to be trumpeted loudly. Purely anecdotally, we have just (within the last half) had someone call to measure up for a new stair/hall way carpet and they were telling me that, after months in the doldrums, business is now at last picking up and they (small, West Yorkshire-based company) are definitely feeling the upturn at last as well.
    I was particularly interested in what you had to say about youth unemployment which (as with much of Western Europe) (but in contrast with countries like Germany and Austria) remains a scandal. No way should any opportunity be lost to drive home the message that, despite pouring billions into education 1997-2010, the outcomes (as with the NHS) generated by Labour are overall less than impressive in terms of equipping young people for work. Such moves by them as the woeful neglect of vocational education and training, the totally absurd fixation on “getting 50% of young people into HE” (why? what forms of HE? with what ultimate goal in sight?), the dismantling of a first-rate careers service, not having the guts to consider radical reform of the curriculum which would (at last!) bring about some kind of parity between vocational and academic studies need to be highlighted again and again and contrasted with the present government’s (and LD in particular) promotion of apprenticeships and the new university technical colleges (which will hopefully (at last) begin to move us closer to the situations prevailing in Germany and Austria).

  • “There is such strong growth in employment in the economy that not only is headline unemployment going down, but unemployment is also going down among some of the more challenging groups, and in all parts of the country.”

    Is that particularly surprising? When total unemployment is falling, wouldn’t we expect unemployment to be falling among different groups and in different parts of the country? Surely the expected differences would be in the level of unemployment, not in the direction of change?

  • Bill le Breton 18th Jul '14 - 1:47pm

    Surely what is ultra interesting is that we have or are on a new Philips curve.

    There is a real chance to keep using accommodative monetary policy. We are at 6.5% and no signs to worry about. Who knows at what level of unemployment we shall see wage pressure building. 6.%? 5.5%? 5%? 4.5%?

    If we had a nominal income target (rule)and refused to use interest rates to address housing issues, we cd see major reductions in unemployment, transforming life chances, transforming public finances, transforming growth prospects.

    As ever, I think that this is all far too important to delegate to the discretion of unaccountable Central Bankers. As it is the pound’s strength is a form of passive tightening.

  • “Chris, I agree it’s not surprising.”

    What I’m asking is why you think it’s evidence that the growth in employment is particularly strong.

    You seem to be agreeing that it would be expected whenever unemployment is falling, not just when there is strong employment growth.

  • Nice post Joe thanks for this 🙂

    It’ll be interesting to see how average pay behaves as unemployment continues to fall. My 1998 Economics degree would naively guarantee that as slack was taken up then people can negotiate better pay deals and wages will rise. I don’t think in reality this will happen though, we seem to be globally valuing labour less and less in favour of capital (labour’s share of national income has been falling for years), probably being driven by globalisation and outsourcing, along with the weakening of the trade union movement as a whole over the past three decades.

    For this reason I think the argument for a living wage has never been more compelling, I don’t think wages will keep up with inflation without some government intervention.

    Just on the income tax threshold, I’ve had a nagging doubt that raising this threshold has simply allowed employers to keep wages low. If we hadn’t done this, perhaps we would have seen more people demanding pay increases over the last 4 years. Has a lot of the money from the threshold rise indirectly gone to subsidising low pay?

  • @ Bill Le Breton

    Maybe we are. I think the thing with inflation and wage rises is how powerful people’s future expectations can be in what happens – right now people are expecting inflation to remain low and economic times still feel tough, so they won’t ask for a pay rise. All it takes is for a bit more confidence to return, people’s fear of redundancy reduces and we could get a big jump in wage increases and inflation very very quickly. We could return to a more normal Phillips curve within a few months in the right conditions.

  • David Allen 18th Jul '14 - 2:01pm

    For the tiny minority on this site who prefer an objective view, see:

    http://www.theguardian.com/business/economics-blog/2014/jul/15/uk-economic-recovery-likely-to-last

    Goldman Sachs think our economy is doing well (a) because it’s catching up after several (mostly Coalition!) years of doing badly, (b) because the Bank of England has acted to promote bank lending, (c) because the eurozone crisis has eased. Of course, there’s no political mileage for anybody in those reasons, so let’s ignore them, whether or not they’re right.

    Goldman Sachs do go on to consider two other possible explanations. On austerity, they “don’t doubt that austerity has been damaging for growth”, but just don’t think its effect has been all that important. As to rising house prices and a quietly excessive stimulus to consumption (an explanation which appealed to my own particular political bias) – well again, Goldman don’t think we are really overdoing the housing stimulus, though they admit we should be watching it.

    As to the fantasy that Iain Duncan Smith has created recovery by wrecking welfare – Goldman don’t even bother to comment.

  • @ David Allen

    Of course reducing a massive deficit is going to be bad for growth. By the pure mathematics of what you are doing (taking demand out of the economy, either by raising more taxes or by cutting spending) that is self-evidently true.

    I really don’t know what your point is when you echo Goldman Sachs when you say “austerity has been damaging for growth”. Of course it has. Bringing down a deficit, whichever way you do it, reduces growth.

    What are you saying we should have done instead?

  • Is that particularly surprising? When total unemployment is falling, wouldn’t we expect unemployment to be falling among different groups and in different parts of the country?

    Not necessarily. It is mathematically possible (and not that uncommon in reality) for a trend at a population level to be reversed in some or perhaps all subgroups.

    See: http://plato.stanford.edu/entries/paradox-simpson/

  • Is the employment rate still based on a sample of 41, 000?
    Does it include the reclassification of those sanctioned as no longer seeking work and the encouragement to reclassify as self employed, those on various schemes and the collapse of ATOS meaning less disabled people are reclassified as seeking work. Cuz where I live, I see more shops closing down. more people drunk in public parks, more signs of homelessness and more food banks etc,
    Anicldotal I now but I still think there’s a lot of baloney involved in our economic recovery.

  • Little Jackie Paper 18th Jul '14 - 3:29pm

    Gareth/Bill – I see the points you are getting at, but I’m not sure that confidence in the labour market provides a full answer.  Most notably there doesn’t appear to have been much wage-restraint at the top end of the scale in the great recession.  Similarly rents (at least in some places) don’t suggest that landlords have felt the need to be restrained when labour struggled.  I will also leave to you the value judgment on whether easy access to immigrant labour is having any effect on employee confidence or not. It isn’t entirely clear to me at what level the pressure for wage increases will come – but I do agree it is there, but perhaps not to the extent you both credit.

    The recent (very small) increases in sterling are also to be greatly applauded, but certainly not overegged – post QE sterling is a toilet paper currency, the fact that others have reduced their currency to similar status too is nothing to celebrate.

    Might I posit another option for optimism – reduction in household debt.  I am continually surprised that the Coalition has not talked far more about the very significant deleveraging that we have seen.  See here http://uneconomical.wordpress.com/2013/05/23/deleveraging-is-easy-deleveraging-is-good/.  Now sure these numbers are still nothing to sing and dance about.  And I do have a suspicion that the boomers are doing better in this regard than the young by virtue of generational advantages (hardly anything to celebrate).  But even with these caveats there has been real progress made and I imagine it is feeding into confidence at least as much as the labour market.

  • @Joe
    It seems like you are trying to take credit for the figures. What is the evidence that Lib Dems should take credit?

  • David Allen 18th Jul '14 - 3:59pm

    RC, I’m not arguing here about whether austerity was or was not the best policy. All I’m saying is that it’s refreshing to see an independent financial commentator breezily dismissing all the red-hot political point scoring about issues such as austerity policy as just unimportant, and attributing our economic performance to good technical management by the Bank of England.

    So my point is the same as Voter’s. Politicians love to say “It’s the economy, stupid”. They love to claim the credit in boom conditions, and to pass the blame to their opponents when things turn bad. Actually, it’s the politicians who are being stupid. Commonly, they don’t deserve the credit for a boom, nor do they deserve the blame for a bust.

    Bill Clinton and Tony Blair got the credit for the boom they presided over. We now know that it was a bubble. Gordon Brown got the blame for the bust in 2008-2010. Ironically, Labour were probably running the economy much more rationally and effectively in 2008-2010 (when they got the brickbats) than they did in 1997-2008 (when they got the plaudits).

    Cameron and Clegg, in tandem of course, want to win the next election on the economy. They don’t deserve it, either.

  • The amusing thing is that a couple of days ago Nick Clegg began his differentiation strategy by disassociating himself from the Coalition’s welfare reforms; ironically possible the most popular thign this government has done!

    ‘It could have been a Liberal Democrat triumph, too, had Nick Clegg been minded to take credit for it. But he has decided that all of this is just too Tory for his grassroots to swallow. One of Clegg’s aides confesses that, given the popularity of welfare reform, the Deputy Prime Minister considered boasting about it on his leaflets – but his team decided that they couldn’t, because their activists would refuse to post them.’

    http://www.telegraph.co.uk/news/politics/10973875/Whats-the-secret-behind-our-jobs-miracle-Welfare-reform.html

  • Green Voter 18th Jul '14 - 5:38pm

    @David Allen
    (changing my handle to Green Voter)
    I think it is important to know what policy (if any) was effective here so that the same policy can be pursued in future. I sometimes quote Santayana “those who cannot remember the past are condemned to repeat it”

  • Green Voter,
    “I think it is important to know what policy (if any) was effective here so that the same policy can be pursued in future.”

    It depends what you mean by effective. If you want to create short-term gain, long-term pain, and win an election in the short term by saying “it’s the economy, stupid, so please will stupid people flock to vote for me” – Then create a bubble.

    Alternatively, put on the sackcloth, preach hellfire and brimstone, hurt people, then tell them it’s only nasty medicine that works and that it’s all the fault of the last lot. That is effective, too.

    Raising taxes to meet necessary costs, planning for the long term, charging people more in order to tackle climate change – now those would truly be effective policies, but of course not popular policies. Our politicians would rather win the next election. It’s like flying over a war zone, It saves a few bob, and if something goes wrong, you can always shift the blame onto someone else.

    The Liberal Democrats used to have nobler ideals than the rest, but they don’t any more.

  • @David Allen
    Well, you can see on the other thread that I favour the use of wave power as a way to reduce our usage of fossil fuels and would like to see others endorse it too.

    I am not for the short-term plan you rightly criticise.

    @Joe
    As for unemployment reductions, if I cannot link them to a specific action by the government, I would not want to give any credit, any more than I would give credit for it being warm today.

    I suggest there are things that governments can do to artificially create demand, such as stimulus and devaluation of the pound to boost exports.

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