Latest labour market stats: a real and sustainable recovery?
Photo credit: JohnSeb
September 13, 2013 // By: Jacob Mohun Himmelweit
It has been a summer of good economic news for the government, and this week’s Labour Market Statistics must have added to their delight. Employment is up, and unemployment has actually fallen – it now stands at 7.7%, down 0.1% over the quarter.
But this doesn’t tell the whole story. We have already written about the importance of looking beyond the headline figures, and this week’s stats are no exception – serious problems in our labour market remain, to the detriment of large parts of the population:
- Youth unemployment continues to rise. The unemployment rate for young people increased by 0.5% over the quarter and now stands at to 21.0%.
- Long term unemployment has also increased. The number of people who have been unemployed for over two years increased by 11,000 over the quarter.
- Income growth was again poor. The rate of growth of average earnings excluding bonuses fell from 1.1% to 1% between June and July. While unemployment has fallen, the fact that 2.49 million people are currently looking for work means there is no pressure on employers to increase wages anytime soon.
The Chancellor has recently felt buoyed enough by headline statistics to claim economic victory over Labour. Rather than getting questioning his claims – as others have done so very eloquently already – let’s assume that he is, that the economy has turned a corner, and we are now finally recovering from the financial crash.
The composition of new jobs is telling of a deeper problem looming. One sector stands out in particular; real restate, rising by 50,000 jobs, or a massive 10% in last three months. This appears to be a direct response to the Government’s Help to Buy scheme as the volume of house sales has increased significantly since the policy was rolled out.
With prices as well as volumes increasing, there looks to be a housing bubble brewing. Government policies more focussed on winning popular support look to be making matters worse. With the problems of stagnant wages we must ask the question, is this really a sustainable recovery?
The answer must surely be no. The Chancellor seems to have abandoned previous plans to build a recovery on structural rebalancing and has instead relied on consumer spending and asset, or more specifically house price, inflation to drive growth. The labour market statistics only confirm this.
Low earnings growth and rising house prices are simply not sustainable. The increase in real estate jobs is due to the Government artificially backing new housing sales and cannot continue indefinitely.
New evidence from the labour market this week casts doubts over the Chancellor's claims of economic recovery.