Britain’s mixed bag labour market
Just ahead of the Budget, the latest jobs figures for the UK may look like a mixed bag but it's roughly the same picture since the recovery: stronger job growth, weaker wage increases. As such, there's something for everyone to latch onto.
First, the most eye catching figure is that employment is at a record high 73.3% - 22.64 million is the most people in work since comparable records were collected in 1971. But, there's 8.3 million people working part-time, and that's an increase of 137,000 from a year ago.
Some time ago, I attended a lecture by a US president who was touting the number of jobs that his administration has created. Someone in the audience stood up and said: yes, it's true, and she had three of them and still couldn't afford to pay her bills.
The unemployment rate remains unchanged at 5.7%, which is the lowest since 2008. That's something to cheer about, since the jobless rate is moving back toward what it had been before the crash, of around 5%.
It's one of the strengths about the British labour market versus the continent where unemployment does not tend to decline back to pre-recession levels.
However, the number of economically inactive (those who are not seeking or available for work) has risen by 14,000 from a year ago, though it's slightly down on the quarter. Fewer people looking can reduce the jobless rate since these people drop out of the workforce.
But, this is a small increase. More notably, the expectation of economists that inform market expectations was that the jobless rate would fall to 5.6%, so that's contributed to a plunge of the pound to a 5 year low.
A weak sterling isn't necessarily negative. But, any dramatic fall in a currency reflects market disappointment.
And that brings me to the important point about incomes. Average wages, excluding bonuses, rose by 1.6% (it's 1.8% including bonuses).
It's a continuation of the recent welcome trend of rising real wages - though that has had a lot to do with very low inflation of just 0.3%. And even then, it's rather weak income growth six years into a recovery.
Plus, economists were expecting stronger wage growth of 2.2%. So, that's also why sterling took a tumble.
This is the same combination of good job growth but weak wages that's been a trait of this recession, and I've written about the UK productivity puzzle before.
Wages reflect output per worker (which is the measure of labour productivity) so weak productivity tends to be associated with lower wages.
Research by the Centre for Economic Performance at the LSE emphasises that more investment is needed in not just capital but innovation that can raise productivity.
They suggest policies to improve firms' access to finance, information, and expertise. Like others, they are not opposed to some industrial policy. That's where a weak sterling could help.
Coming back to the labour market statistics - there's something there for everyone to claim as the success/failure of the government.
You'll have seen the claims and counter-claims already. There's no doubt that there's a general election around the corner.