The UK unemployment rate drops again

unemployment-rate

With the UK unemployment rate dropping quickly to 7.1%, in the three months to November 2013, there is a strong case for optimism in the jobs market. Roughly 30.15 million people are now in work, an increase of 280,000 in the last quarter – the biggest increase since records began in the 1970s.

As we went to press, however, this month’s figures put the rate at 7.2%. This is likely to be a blip showing nothing more than that the pace at which unemployment is falling has slowed. Take heart that overall, the Office for National Statistics (ONS) says jobs vacancies have risen by 75,000 since 2012 and analysts say the general trend is that the jobs market is looking rosier.

 

What is significant?

The number of people out of work fell by 167,000 to 2.32 million, according to the ONS. This is the biggest quarterly drop in unemployment since the autumn of 1997 and is evidence, according to Chancellor George Osborne, that the economic plan is working.

To break the statistic down further, the number of people claiming Jobseeker’s Allowance fell by 24,000 to 1.25 million in December and the number of people in part-time work because they couldn’t find full-time jobs dropped by 12,000 to 1.4 million.

Youth unemployment is still a concern, but at least it’s going in the right direction, with the number of 16-24 year old out of work decreasing by 39,000 from the previous three-month period to 920,000.

According to ONS figures, the house sales industry has reported the biggest percentage increase in job vacancies, though this represents just 3,000 actual jobs up on December 2012. In fact, it’s the motor trades sector that has seen the greatest increase in job vacancies, up by 18,000 from last year. Construction, healthcare and public administration have also contributed to the total increase in jobs vacancies of 75,000 since 2012.

 

Other patterns in the jobs market

As of the last quarter of 2013, some 4.3 million workers in the UK are officially self-employed, an impressive increase of 573,000 workers since the recession of 2008-09, equivalent to a rise of 15%. It’s a trend that shows no sign of abating.

Professional HR body, the CIPD, estimates that this rise in self-employment has compensated for about 40% of job-losses during recession. It is likely that without this trend, unemployment would have reached three million. And women, who represent more than half of the self-employment growth since recession, would have been particularly vulnerable.

A Home Office study also shows that the number of British workers in low-skilled jobs is now rising at a faster rate than the employment levels of foreign nationals in similar roles, reversing a 10-year trend. The report says Brits have accounted for 92% of the total rise in employment in the 12 months to September 2013.

 

Wages

Unemployment might be improving surprisingly fast, but wages have not been. The ONS reports that average earnings increased by 0.9% in the year to November, unchanged from the previous month. Labour leader Ed Miliband has argued that average wages are £1,600 a year lower than they were in 2010.

 

What next?

Despite this month’s unemployment-rate blip up to 7.2%, there’s no denying that the record-breaking rise of 280,000 people with jobs augers well. David Tinsley, chief UK economist at BNP Paribas, described the figures as “staggeringly strong”.

Certainly, analysts didn’t expect the unemployment rate to hit 7% until next year, but new estimates reckon it could be as soon as this Spring. So far, however, there are no indications that the Bank of England will automatically raise interest rates from 0.5%, even though the 7% was declared the magic number. Speculation persists that it may now happen in Spring 2015.

There was a flurry of excitement. The jobs figures initially boosted confidence that interest rates might rise sooner rather than later, pushing up the value of the pound, which hit a year-high against the euro of E1.222 and a near three-year high against the dollar of $1.6553.

Nevertheless, economists are cautious, pointing out that the country is still battling the aftermath of the financial crisis and economic activity is still below pre-crisis level. And clearly there is a long way to go before we hit the 2005 unemployment low of 4.7%. But as Martin Dougal, senior partner at KPMG, told the BBC: “We have had a number of months now with good economic news coming through and there is generally an increase in business confidence, in consumer spending, and in growth across the country. That is now beginning to feed through to employment prospects, which are good, for many people – particularly those with good marketable skills.”

All in all, it gives you a warm glow.

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