The UK Labour Market 2010 - 2013

The full cohort of Labour Market statistics came out today from ONS, summarised in their usual helpful Statistical Bulletin.  As part of our assessment of the UK economy over the life of the present government, we thought it would be interesting to compare the current figures with those of the summer of 2010, to see what significant changes have taken place.  Here you can see some percentage changes over 3 years.  Note in particular how far the increase in GDP over 3 years is below the increase in employment and hours worked.

changes in emp and GDP 2010-2013
changes in emp and GDP 2010-2013

Blue = 2010 (100%), red = 2013. The chart's employment and population statistics, from ONS, compare June-August 2010 with May-July 2013.  GDP compares Q3 2010 with Q2 2013

From this we see that the total number of of those over 16 has grown by 2.14%, (1,066,000) and the economically active by 2.34% (740,000).  Employment (full or part time, employed and self-employed) has risen by 2.43%, or 792,000, while unemployment has also risen, but by 1.3% (34,000).  In its own terms, this could all be categorized as some (but not stellar) improvement, given the shock the economy had faced in 2008-09, and is certainly better than many Eurozone countries.  The growth of jobs has just about kept up with the increase in population, but not enough to make a real dent in the unemployment number (2.5m).  And it masks other major weaknesses, as we show.

Very significant - and this lies at the heart of the alleged "productivity puzzle" - are the changes in hours worked, measured against the changes in economic activity as measured by GDP. The average number of hours worked per week has risen by 4.14%, whilst GDP has risen (Q3 2010 to Q2 2013) by a meagre 1.81%, or about 0.6% per year. This is about the same as the total population increase over the period, meaning that GDP per head of population has been stagnant whilst productivity has fallen.

For the record, we have also looked at the picture for those between 16 and 64 years.  The pattern is very similar, though the overall total population has increased less.

The next chart looks at percentage changes in full-time and part-time employment over 3 years.  The absolute numbers are of course far greater for those in employment than for the self-employed.

full and part time corr
full and part time corr

The increase in full-time employment is 2.95%, a total of 625,000, while that in part-time employment is just 1.04%, or 83,000.  This is contrary to the perception of many that the rise in employment has been in particular in part-time jobs - though that was more the case a year ago.  The increase in full-time employment and self-employment have been about equal in % terms.  But when it comes to part-time work, the number of those employed part-time has fallen by 0.73% (49,000), while the number of part-time self-employed has risen by a big 13%, or 134,000.

Of the overall increase in numbers of those in employment, the self-employed form 30.84%.  Part-time self-employed comprise 19.68% of the increase.  This is a really major directional shift in the  structure of the UK workforce.

Last but not least, the value of real pay continues to fall  - total pay has fallen below CPI inflation throughout the period since 2010, and in the year May-July 2012 to 2013, total pay went up by just 1.1%, while inflation rose by 2.8%, a loss of 1.7% of pay.  We haven't done the precise sums ourselves, but these have recently been estimated at 5.5% - a figure which is consistent with this chart.

total pay v inflation may to july
total pay v inflation may to july

So once again, as we said exactly a year ago, we can conclude that in the UK, starting in 2010 and up to the middle of 2013, more people have been working for longer hours at lower total real pay to produce no more stuff.  On the plus side, more are in work, and unemployment has not increased beyond the 2.5 million mark, and recently with an increase in full-time employment.  Alongside this, the biggest percentage increase is in the self-employed, and the part-time self-employed are growing faster than any other sector.

In the labour market, therefore, the "rebalancing" achieved over 3 years has been relentlessly in the direction of a lower wage economy.