Unemployment changes workforce dynamics
In the past unemployment in the UK has been a lag indicator of economic health.
Rising not the moment activity drops but later, when businesses become convinced the fall in activity was not a temporary blip but a lasting problem. The recent recession was different. As the credit crunch developed, threatening a caustic combination of lower demand and more difficult financing, companies cut costs as soon as they could.
Workforces were included in this, generating a swift and substantial increase in the numbers unemployed. Since then the headline jobless rate has remained steady at almost eight per cent of the labour force, kept high by a dull economy but helped by an extended period of wage increases far below the rate of inflation. However, although overall numbers seeking work may have remained broadly unchanged, that is not to say that there have been no changes in the workplace.
Aging workforce
A particular feature has been the aging of those in work as youth unemployment has risen (to over 20 per cent) whilst post-retirement age working has become more established. In the past decade the number of over-65s still working has more than doubled to 870,000, equivalent to three per cent of the total. Two-thirds have been with their employer for more than 10 years, but overwhelmingly the roles are part time.
Not enough new jobs for old
Just as job losses have historically tended to follow activity levels after a delay, so too has job creation. The problem in this upturn has been that, although the economy has been growing, the pace of expansion has simply not been strong enough to feed through into demand for labour. In recent months however, almost 18 months into the upturn, there have at last been signs of job growth in the private sector. However, welcome though this trend is, they have become overshadowed by accelerating job losses in the public sector, which of a total UK workforce of about 29m, employs 6m people, or just over 20 per cent of the total.
A modest recovery
Despite a recent improvement in the government’s finances it seems very unlikely that the squeeze on spending will be reversed or even relaxed. On this basis it seems likely that although the economy will continue a modestly paced recovery, unemployment will remain high and indeed could increase further in the months ahead.
John Kelly is head of client investment at CCLA
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