Real estate jobs boom a worry – but labour market rebalancing

Allister Heath

IT is the fact of the day: those who work in real estate accounted for 23.05 per cent of the net jobs growth in the UK over the past year. In fact, 13 per cent of the 562,000 total jobs that now exist in “real estate activities” – which include a range of jobs, from those selling and surveying homes to people working in exhibition centres – were added over the past year, thanks to the recovery in the housing market.

It’s partly due to the fact that more people are buying and selling homes, but is hardly the kind of development that will reassure those of us who fear that the recovery is far too dependent on a new housing bubble. Antony Jenkins, Barclays’ boss, was spot on yesterday when he warned that “there is the risk of a property-driven boom in the UK.” While he said that he thought that the “regulators are on it and don’t intend it to happen”, he added that “these things can be difficult to control.” Usually, bank bosses don’t like making controversial statements of this nature so it was good to see Jenkins telling it as it is.
Aside from that, however, yesterday’s jobs numbers were remarkably strong, with full time employee jobs being created and unemployment falling. The total number of hours worked in the economy is at an all-time high. The figures confirm that economic activity – for all its excessive reliance on credit – has bounced back very strongly.
Yet pay remains extremely subdued, growing at just 1.1 per cent over the past year, which means that real wages are still falling at around 2 per cent per annum, given retail price index (RPI) inflation of 3.1 per cent. Britain is enjoying a jobs boomlet but a cost of living crisis.
Again, this is hardly surprising: one doesn’t need a PhD in economics to see that falling prices for a commodity (in this case, labour) is likely to increase the demand for it.
George Osborne has made many errors since he became Tory shadow chancellor and subsequently chancellor, and is now allowing a mad property bubble to develop, but he has also notched up one spectacular success. He is continuing to rebalance the labour force from public sector to private sector, a painful and disruptive move which will eventually boost the economy’s long term rate of growth and the productivity of both private and public sectors.
While obviously difficult for those involved in the short term, this rebalancing will expose substantially more people to the rigours, challenges and potential rewards of the private sector. There were 5.67m people employed in the public sector in June, down 104,000 from a year earlier; there were 24.17m employed in the private sector, up 380,000 from a year earlier.
Because it indicates an unbalanced economy relying too heavily on an overvalued property market, the boom in real estate jobs is worrying. But at least the overall jobs scene is becoming healthier.
One question remains, however. When will pay start to rise faster than inflation? That is the £1m question that will help determine when the Bank is forced to start hiking interest rates.
EVEN Margaret Thatcher didn’t have the courage to privatise the Royal Mail, so the coalition’s uncharacteristic bravery on this issue is to be applauded. The green light for a stock market sell-off will be formally given this morning; the process is likely to take until the end of next month.
Predictably, union leaders oppose the sale, even though workers will be given an extraordinarily generous 10 per cent stake in the firm. The rest of us should support the privatisation, an excellent if belated idea: it is the only way Royal Mail can cash in on the home delivery boom, raise funds to invest in technology and fight back against its ultra-aggressive private competitors. We need private posties, and we need them now.
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