April 2009 UK Employment Data – down, but not over and out

Wednesday, May 13th, 2009 - Article, credit crunch, economics, Employment, government jobs, Immigration, job search, politics, recruitment, redundancy, unemployment

April 2009 UK Employment Data

Straighup un-State
Creative Commons License photo credit: C-Ali
I normally write about UK Employment data at about this time of the month, but have delayed this months thoughts on UK employment prospects as the Bank of England held their monthly conference today. If you are going to comment about employment, then in reality it doesn’t really matter what anyone writes, the readers will all presently be looking at thoughts and predictions on unemployment – and that is tightly tied to financial data.

According to data released by the Office for National Statistics (ONS), the number of people out of work in the UK rose 244,000 to 2.22 million in the period January to March 2009. The increased the jobless rate rose from 6.7% to 7.1%, making the quarterly rises in the jobless rate and number were the biggest since 1981. Unemployment benefit claimants in April rose 57,100 to 1.51 million. Further analysis of the data shows the rates of both the under 24’s and over 45’s rising quickly – one because they are not presently required, one because they are high cost to companies in wages and pension costs.

There were 455,000 job vacancies in the first three months of the year, which was down 51,000 from the previous quarter and 232,000 less than the same period of 2008. Hence, if you are not getting 1 interview in 4 job applications, your job sector choice or CV is failing you

Average earnings had not fallen since records began in 1991, but in another sign of the severity of the economic slowdown, average earnings including bonuses were 0.4% lower in the first three months of 2009 than they had been in the same period of 2008. Excluding bonuses, average earnings grew by 3.0%, down 0.2% from the previous period; hence the ONS said the reduced data average earnings data was “mainly due to lower bonuses in the financial sector.”

Lets just think about those numbers. 244,000 unemployed means that is a 10% rise in unemployment, out of a total Government figure of possible UK workforce employees of 31.267million (NB: I disagree with that total UK workforce data – I think the total employment pool is actually around 20million, if you take out students, the disabled, long term illness, maternity leave, those on a rest period, etc. But lets accept the Government data for this debate). If unemployment kept rising at that rate, then by January 2010, unemployment would be just under 3million, or near the predicted rate by many of 10% unemployment. Some analysts have suggested that the rate could be higher, going as high as 3.3 million – so the same rate of redundancies as in Q1 of 009 through to Q2 of 2010.

It is hence unsurprising that average income data is falling so quickly, but the number of vacancies still remains relatively buoyant. Why?

Here comes the Bank of England data! Mervyn King in his conference today suggested that although the recession would continue, and would not be as bad as the 1929 crash, the up turn was unpredictable. Much as though by mid-2010 there would be (in normal grey banker mode…) “the potential for recovery,” pressures were equally as defined for further depreciation. So kind of neutral there, but he did accept there were some good signs in economic activity. I think Stephanie Flanders of the BBC has the answer, in that her blog of Tuesday suggested a recovery which was square root shaped: a sharp slide, a recovery of sorts to a level below the previous level, and then a long period of additional recovery. That makes sense to me, as further Mervyn King in his data showed that of the UK debt growth in the ten year period to 2008, two thirds of the debt pile was on the side of the banks, while one third was in the consumer side. The various recovery schemes have recapitalised the banks, and they are now – of sorts – lending. But these are UK banks alone, with the foreign banks not retreated back to their homes – you can see the effect of this in mortgages, where 40% of the lenders have disappeared.

Lets just take that last piece of data. If 40% of the capacity of a market has disappeared, and the rest of its suppliers need to pay back large debts, where will the initial recovery point in the square root shaped recession be? UK Banks have suggested that they have filled much of this gap, but if you take the fact that a year ago there were 50 120% mortgage products, and now there are only three 10% deposit mortgage products – the recovery level will be lower by a decent level below what was the level of economic activity.

Is this all bad? Probably not, as historic levels of debt to equity ratio lending returns to UK lending. But that also means that UK unemployment will also return to historic trending levels, and hence those wage rise levels will be low for some period as larger liquidity in the workforce places downward pressure. As people pay back those large levels of debt – with less cash in their pockets – spending in the high street will be lower, and hence as far as I can see the excellent analogy with a square root shaped recovery pattern.

What prospects employment? At this point in the year, we are in the period of university graduation, with new highly indebted students who will accept any work heading for the workforce. Also, we have the up turn in seasonal jobs, with the summer driven economic activity – lets hope it is a great summer! Graduates will be met with a stark contrast: low offers, or no offers. In the case of the former, I can also see employers churning employees and reprofiling workforces through selective voluntary redundancy to older employees. Graduates faced with a long period of unemployment will go and do the world tour thing – and I doubt many will come back. Highly educated and world aware, Asia will seem like a good landing point, with easy visa possibilities. I think we could be looking at a lost educated generation, used to high (debt fuelled for ten years) living, but unable to achieve that in high tax/low leverage UK plc for the next four years+. This prospect should also slow economic immigration, with the Government adding to this immigration slow down by announcing this week a 13,500 reduction in approved student study visa schools list – at last!

So how high do I think unemployment will go? I stick with a prediction of above 3million, but now can’t see a high of 3.3million. Historically, the stock market recovers 12months ahead of the economics, and although unemployment is a lagging factor, it can’t buck a trend. However, I don’t think the recovery will be quick enough to save Gordon Brown and Labour from being ejected, as by next springs election the ONS will be releasing the high peak of unemployment data. Plus, I think the country will accept a need for value delivery, and the high spending days on inefficient public services will be over – I expect a purge on civil servants once the new Government is elected, and many of these relocation schemes to be dumped as cost inefficient. Unemployment reduction to an historic 6% level will take three years plus.

However, much as though the employment data is gloomy, no job seeker should give up looking for work. Clearly with 400,000+ vacancies out there, there is work – you just may have to be better at testing where it is, and then selling your skills to them via a better Professional CV.

If we can help you in any way, please – just ask.

Good Luck!

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2 Responses to “April 2009 UK Employment Data – down, but not over and out”

  1. KrisBelucci Says:

    Great post! Just wanted to let you know you have a new subscriber- me!

  2. AndrewBoldman Says:

    da best. Keep it going! Thank you

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