Bill Jamieson: Employment up, but we’re poorer

The number of people in work has risen, unprecedented when the economy has been in recession, writes Bill Jamieson

The number of people in work has risen, unprecedented when the economy has been in recession, writes Bill Jamieson

Something’s wrong somewhere. This week the café chain Costa Coffee gave a glimpse of the state we’re in. It advertised three full-time and five part-time vacancies at a new café branch on a jobs website. Costa managers were shocked by the response – an avalanche of 1,701 applications.

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They flooded in from first time job seekers through graduates to vastly over-qualified applicants, including former senior managers of high street stores, such as Comet and HMV, which have been forced into administration. The jobs on offer pay between £6.10 and £10 an hour. But in a traumatised retail sector today, with thousands of staff being laid off, any job is to fight for.

Compare this with the picture of the same labour market presented in official data yesterday.

Unemployment across the UK fell by 14,000 between October and December to 2.5 million and the numbers of people in work rose by 154,000 to a new record of 29.7m. Numbers employed are up more than 580,000 compared with a year ago.

This is a remarkably resilient performance in the wake of the financial crisis. The unemployment rate peaked at 8.4 per cent in October and November 2011 – well below the fears of most when recession set in, and below the previous peaks of 11.9 per cent in 1984 and 10.7 per cent in 1993. However, headline unemployment is still well above the pre-financial crisis average of 5.5 per cent.

Here in Scotland the unemployment total fell by 13,000 to 206,000. The total number of employed in Scotland now stands at 2,461,000. The number claiming Job Seeker’s Allowance here fell 600 last month and by 5,200 over the year to 137,000. Youth unemployment is down 5.9 per cent. Overall, the Scottish unemployment rate is down to 7.7 per cent – slightly below the average of 7.8 per cent for the whole of the UK.

Yet numbers in work in Scotland are down, in contrast to the UK as a whole. And there are many stories here similar to that at Costa Coffee – hundreds of applicants chasing one job, thousands of graduates frustrated at being unable to find work, and tens of thousands more trapped in poorly-paid temporary jobs while they search for positions to which their skills and experience are better suited.

So how have the numbers in work risen when, for much of the past 12 months, we have been in recession or in stagnation? The economy has barely grown. Construction has continued to shed jobs.

The fall in unemployment and the growth in overall numbers employed – a public sector jobs shrinkage of 128,000 being more than offset by a rise of 627,000 in private sector jobs – continues to belie the picture of a no-growth “Poundland economy” on the ropes.

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The labour market data is – and has been for many months – to quote Churchill on Russia, “a riddle, wrapped in a mystery, inside an enigma”.

The most common explanation is that full-time employment has continued to suffer while part-time employment has risen sharply. But this doesn’t quite cut it as an explanation. The number of people in full-time employment is up by 394,000 in the October-December period compared with a year previously, the sharpest increase since 2005. The number of part-time jobs is up by 190,000. Indeed, part-time employment at 8.08m was down some 43,000 on the immediate previous July-September quarter.

“Older workers are being thrown on the scrap heap” is another common refrain. But this does not quite cut it, either. A close look at the Office for National Statistics labour market data reveals that the numbers of those aged 50-64 in employment rose by 1.2 per cent over the quarter and by 2.9 per cent over the last 12 months to stand at 7.62m.

And the numbers of those aged 65 and over in employment rose yet again by 3 per cent over the quarter and by 11.4 per cent over the year to stand at 973,000. We are now within striking distance of the numbers of those officially over retirement age but still in work crossing the million barrier for the first time ever.

That may be a case of woe for some. But for many still willing and able to keep their hand in, or who want to augment their pension or who enjoy the sense of purpose and social attraction of work, it is a boon.

For the SNP administration the figures present a particular difficulty. It cannot do otherwise, of course, than welcome the latest further fall in unemployment here. And it will certainly be pleased that the unemployment rate in Scotland is lower than for the UK overall. But having banged on incessantly about the “levers of power” in London denied to it, the picture hardly suggests a country being ground down under the oppressive heel of unionist neglect.

Overall, the figures present a picture of a UK economy that is not at all conforming to previous experiences of recession and which is supporting near record numbers in work. Productivity has taken a hit – more in work but output little better – and there may still be labour hoarding. But the figures may be telling us of an accelerating shift to a more fragmented economy, one driven by the internet and marked by a honeycomb of specialisms. The growth in self-employed – up 25,000 over the quarter to 4.2m – would testify to this.

Meanwhile, there is one notable feature of the data that provides no comfort at all. Average weekly earnings continue to trail inflation, rising by 1.3 per cent compared with an inflation rate of 2.7 per cent. In fact, the rise in average earnings has now lagged inflation since December 2008.

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There may be more numbers in work than we dared hope two years ago. But we are poorer in spending power terms once adjusting for inflation. This helps explain the strange juxtaposition of relatively buoyant numbers in work and growing decay and dilapidation in the high streets as once-thriving chains such as HMV, Clinton Cards, Comet and Jessops have closed their doors.

So there is no room whatever for complacency. Indeed, little by way of economic recovery can be expected when the domestic household sector is under such pressure. And it does not let Chancellor George Osborne off the hook ahead of his budget, just a month away.

The coalition may crow about this one item of better news amid growing signs that the budget deficit target is set to be missed by a mile. But it is the ability of the government to sustain this labour market improvement that will be critical.

Achieving a further improvement in numbers in work will be a formidable challenge without a pick-up in overall economic activity. And at present the signs do not look good. Most independent forecasters see little prospect of growth achieving even 1 per cent this year – some predictions are as low as 0.3 per cent.

It will take a major enterprise-boosting budget to sustain this recent rate of jobs improvement. And as for unemployment falling back to the levels recorded before borrowing boiled over and the financial crisis struck: think miracles.