Unemployment: what the experts say
 | |
| Unemployment is on the rise. Photograph: Danny Lawson/PA |
With the number of people out of work in the UK rising over the 2.5 million mark today, analysts fear that the jobless crisis will escalate in 2011
Andrew Goodwin at the Ernst & Young Item Club
These figures confirm that the improvement in the labour market, seen in the middle of the year, has ground to a halt. After the strongest quarter for job creation on record in the summer, the ILO [International Labour Organisation] measure of employment has now moved into reverse. Indeed, all of the ILO indicators show worrying trends, with unemployment and inactivity rising. Further evidence of a fragile labour market come from another steep decline in the number of full-time workers, allied to rises in the number of people being forced to accept part-time or temporary work because they can't find a full-time job.We are already beginning to see the impact of fiscal retrenchment on the labour market, with public-sector jobs being cut in Q3 and the private-sector struggling to make up the difference. With recent business surveys suggesting that firms remain wary of hiring, this is likely to be an increasingly important theme over the coming year as the pace of public-sector job cuts steps up. Private-sector hiring is being held back by residual concerns about the durability of the recovery and the fact that many firms chose to hoard labour during the recession. So it looks likely that we will see a further increase in unemployment over the first half of next year.
Single and looking. Email me
There is little in the way of good news in this release. The only positives come from a small rise in vacancies – which suggests that there is some life in the private sector – and earnings growth, which has continued to slowly strengthen. But even this is tempered by the fact that earnings remain subdued by historical standards and continue to lag someway behind inflation, thus eating into consumers' spending power. Earnings growth of just 2.2% certainly suggests that we shouldn't be too concerned with inflation taking off over the medium term.
Ian Brinkley, associate director of The Work Foundation
The labour market recovery has stalled, but it is premature to talk about a "double-dip" recession. The fall in employment, hitting women more than men, and rise in unemployment shown by the Labour Force Survey are small, comparing the three months to October with the previous three months.The bigger concern is that we have still seen no turn-round in full-time jobs.
Full-time jobs are still falling and there has been a significant increase in the number of people in part-time work because no full-time jobs were available. Until full-time jobs start to increase again the labour market will not be able to absorb large-scale job losses in the public sector. Unemployment in 2011 must then inevitably rise.
Nigel Meager, director of the Institute for Employment Studies
The figures again serve to highlight the fragility of the labour market recovery. Overall employment fell slightly, by 33,000, as a result of the decline in public-sector employment, which is now starting to show up clearly in the official figures. Redundancies in the public sector are now running at twice the rate of a year ago, whereas redundancies in all other sectors have fallen over the period.Unemployment stands at 2.5 million, having risen by 35,000, and it is clear that conditions remain very tough for jobseekers, with 5.5 unemployed people for every vacancy. More than one-third of the unemployed have been out of work for 12 months or more, and the number of long-term unemployed is at its highest since 1997.
The rise in unemployment was more marked among women, and while in the past 12 months the general trend in male unemployment has been downwards, for women it has been clearly upwards, growing by some 89,000. With women more heavily represented in the public sector this trend may be set to continue.
The figures also highlight the amount of spare capacity in the labour market, and the number of people working part-time because they could not find full-time work is now at the highest level since records began, standing at 1.16 million. The growth in those working in temporary contracts because they couldn't find permanent work also continued, growing by 23,000 over the quarter to reach 592,000.
Charles Davis at the Centre for Economics and Business Research
Overall, today's figures are a reminder that there is still a long way to go in the labour market recovery despite the ground gained earlier this year. In many cases, businesses are still too cautious about future prospects to aggressively expand headcount, especially ahead of a year in which the VAT rise and the effect of soaring commodity prices will squeeze households. Although private-sector employment should grow to some extent in 2011, the public sector will have started to retrench; the Office for Budget Responsibility is expecting 40,000 job losses in 2011-12. Hence, we expect the unemployment rate to rise above 8% in 2011.David Birne, an insolvency practitioner at HW Fisher
The latest unemployment figures are a taster of what is to come in 2011. This time next year we expect unemployment to be considerably higher than it is at present, as many more of Britain's companies go to the wall.We deal with companies of every size and from every sector day in, day out and for a large chunk of them things are looking very bleak indeed.
And with the VAT rise, rising inflation and potentially higher interest rates cutting further into people's spending power next year, things are only going to get tougher.
For the UK's businesses and their employees, 2011 is shaping up to be harsher than any of the past three years.
Anyone who thinks the private sector can take up the slack from the public sector is out of touch with what's happening on the ground.
Howard Archer at IHS Global Insight
The labour market data are pretty disappointing overall and will do little to ease concern that unemployment is likely to rise in 2011 in the face of slower growth and increasing job losses in the public-sector.Meanwhile, underlying wage growth only edged up in October and remained muted so it still seems highly unlikely that wage pressures will pose a serious inflationary threat anytime soon, which supports the case for the Bank of England to keep interest rates down at 0.50% for some time to come.
Even if inflation expectations rise further, this is unlikely to translate into markedly increased pay awards as workers appear to have little bargaining power given high unemployment and an uncertain labour market outlook. Indeed, with real wage growth negative and the major fiscal squeeze increasingly kicking in from the start of 2011, it is hard to see consumer spending being anything else than limited for an extended period.
Labour market data may well be mixed in the near term, but we expect a modest deteriorating trend to emerge as 2011 progresses. We suspect that unemployment is headed up in 2011 as a consequence of slower, below-trend growth, rising business caution and public-sector jobs being increasingly pared. Specifically, we forecast unemployment on the ILO measure to rise to 2.65 million by end-2011 and to peak around 2.75 million around mid-2012. This would see the unemployment rate rise to 8.4% by end-2011 and to a peak of 8.6% in mid-2012.
