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Why the 11th of June Will Be a Difficult Day for the Coalition

Whilst this week’s labour market figures contained good news for employment, there are clear signs that the data to be released on the 11th June could be disappointing. As a result of base effects, it is quite likely wages will show a contraction in real terms compared to a year before. The fragility of real wage growth and continued bad news on productivity show the need for more ambitious pro-growth reforms and the dangers of an anti-business agenda.

The total number of employed people has increased by 283,000 over Q1 2014 and by 722,000 over the year to reach 30.43 million. Even more encouragingly, the employment rate has matched this substantial growth in numbers. 72.7% of people aged 16 to 64 are now in employment, an increase of 0.6 percentage points over the quarter and an increase of 2.3 percentage points since the last election.

The unemployment rate has fallen to 6.8%, a 1 percentage point fall on a year ago, and the number of unemployed people has fallen to 2.21 million, a fall of 15.4% over the last two years. There was an increase in part time employment from 7.9 million to 8.02 million over the last quarter but that appears to have been driven entirely by a rise in the numbers of people who did not want full time jobs from 5.22 million to 5.36 million. The number of part time workers who could not find a full time job actually fell by 7,000.

The inactivity rate continued to fall with 21.9% of 16-64 year olds being inactive in Q1 2014 compared to 22.4% last year. This means the inactivity rate is now the lowest it has been since Q4 1990. Nevertheless, there are still 8.85 million economically inactive people across the UK which remains too high. The progress over the last few years shows that a specific aim of reducing inactivity combined with effective tax and welfare policies can yield improvements and release the economic potential of the country.

It seems likely this strength in employment will continue given the very positive data on vacancies and hiring intentions. The total number of vacancies continued its march upwards reaching 628,000 in the three months to April. This is an increase of 22.6% over the year. Moreover, survey data from the Chartered Institute of Personnel and Development shows substantial rises in employer hiring intentions.

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Adam Memon & Tim Knox - Friday 16th May 2014

Adam joined the Centre for Policy Studies as Head of Economic Research in January 2014. 

Adam joined the Centre for Policy Studies as Head of Economic Research in January 2014. 

Tim Knox was Director of the CPS from 2011-2017. Before he was Director, Tim was the Editor at the CPS - a position in which he was responsible for publishing papers by every Conservative leader since Mrs Thatcher as well as by hundreds of leading academics and opinion formers.