Good and bad news on the jobs front

 
Allister Heath
THERE are not enough jobs in Britain. Among all the claims and counter-claims about the state of the economy, that is one of the few facts that everybody agrees on. The number of unemployed people was up 87,000 from a year earlier, according to the least unreliable survey of these matters; the true number is higher. The young are finding it especially hard to find work. Those of us fortunate enough to have a job should thank our lucky stars; nobody should ever downplay the traumatic financial and psychological toll of unemployment.

But while unemployment has risen, the overall picture is less grim. It actually confirms that the economy is recovering, led by the private sector, and that it is rebalancing faster than hoped for. This is not a jobless recovery. The private sector is creating more than enough jobs to replace those being lost by the public sector. And while it is true that overall spending cuts haven’t really started yet, reductions to the state’s payrolls have already been proceeding in earnest.

In the most recent quarter, public sector employment was down 123,000 year on year (a drop of two per cent) excluding state-owned financial companies (132,000 or 2.1 per cent, including them). This is the biggest drop since 1994. The rate of public sector jobs cuts will probably remain roughly constant over the next few years. It is unlikely to accelerate – or if it does, the cull will end earlier than expected. But private sector employment rose 428,000 (1.9 per cent) year on year, the biggest rise since the first quarter of 2008 and taking the net rise in overall employment to 296,000 over the past 12 months, a respectable figure. The problem was that the amount of people looking for work went up faster than the total number of new jobs created. Britain probably needs to create 400-500,000 extra jobs a year to start cutting unemployment noticeably.

But the private sector is doing well despite weak overall GDP growth and a growing burden of tax and regulation. For every state sector job being lost, 3.5 are being created in the private sector. Even more encouragingly, while the jobs recovery started off with part-timers (up 206,000 over the past year), there has now also been a rise in full-timers (up 90,000). Over the past three months, part-time jobs actually fell, with the rise in full-timers more than compensating.

There are lots of other interesting trends. Employment in manufacturing is up 14,000 – 0.5 per cent – in the most recent quarter. This is the biggest increase since 1997. Less welcome was a 2,000 drop in finance and insurance jobs over the past year. The number of people in employment aged 65 and over jumped 56,000 on the quarter to reach 900,000, a record. The number of people in employment aged between 50 and 64 also increased to the highest figure on record. Overseas-born people are still proving to be much more adept at finding jobs than the UK-born, who grabbed just 15.7 per cent of new positions. The young and the UK-born are struggling; older, more experienced workers and the overseas-born are doing well. This two-tiered labour market is a huge problem. George Osborne shouldn’t panic or delay his budgetary tightening. But the government desperately needs to do two things: first, improve the incentives for firms to hire staff. Second, work out why it is that employers prefer pensioners to young people. One thing is clear: Britain needs a skills revolution – and fast.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath