Finance News

UK Employment Booms As Economy Shrinks

If you were to look only at the state of the jobs market in the UK and the statistics for employment, unemployment and those who claim job seekers allowance, you might be fooled into thinking that Britain is enjoying a new period of economic growth. The number of people in work is climbing and has just been confirmed to have hit a new record in November 2012. Unfortunately, the percentage of employed people hasn’t reached its 2008 level yet due to more workers entering the workforce.

However, the economy is expected to have shrunk in the final quarter of 2012 and there are now expectations that it will do so again in the first quarter of 2013. Deutsche Bank’s George Buckley sums up the confusing situation: “The jobs data is going to perpetuate this question of the productivity puzzle because the numbers are exceptionally strong. Unemployment down, employment up, claimant count down [..] while we’ve got weak economic growth, because we’re going to see GDP in Q4 probably -0.1 per cent, 0.2 per cent.” When looked at like this, it seems that more people are managing to do less work.

One of the biggest factors explaining this is the rise of part-time workers, with overall numbers for those in full time employment falling by 341,000 since the high of 2007 and the number of part-time workers rising by 660,000 in the same period. Another big factor is the slow increase in wages, allowing employers to hold onto more people despite not making more money. Whilst this is good for job figures, the workers affected by it are finding that their incomes won’t stretch far enough, which has had a visible effect on consumer spending and the rise in pay day loan providers in recent years.

The rise in employment might be surprising given the recent news about jobs being cut at Barclays and firms like HMV and Jessops going out of business, but ING economist Rob Carnell says that it’s important to look at more than just the headlines: “In spite of some high profile retail failures in recent months, and large-scale job losses in the automotive sector, the UK added a surprisingly large 90,000 jobs in the three months to November.” The statistics demonstrate that people are managing to get into work, though they are unarguably doing more work for less pay, a situation which many will see as preferable to mass unemployment.