MacroScope

Deconstructing UK job numbers

April 16, 2014

On the face of it, the good news for the British government keeps on coming. Britain’s economy grew surprisingly fast last year and inflation fell below the Bank of England’s target for the first time in over four years in January. The government this month even got a nod from the International Monetary Fund which only last year criticized its austerity programme.

The latest confidence boost came from jobless figures on Wednesday. Not only did the unemployment rate fall to a five-year low of 6.9 percent but pay growth caught up with  inflation for the first time in nearly four years. That provides Prime Minister David Cameron’s government with another lift ahead of the 2015 elections, after it has come  under fire from the Labour opposition for overseeing a fall in living standards.

But a closer look at the data suggests a more nuanced picture.

Indeed, total pay growth in February reached 1.7 percent – matching the 1.7 percent rise in consumer prices in February and above their 1.6 percent increase in March.

But excluding bonuses, wage growth was 1.4 percent  – below consumer price readings for February and March.

Now for the record high number of people in employment at 30.389 million – that was fueled by a record number of self-employed workers, many of whom a recent survey showed would prefer to be employed by someone else.

According to Marc Ostwald, strategist at Monument Securities:

 The 239K rise (in) employment looks impressive vs. the expected +90K, but it is very deceptive as there was a 146K rise in self-employed, and a 74K rise in part-time employment, and that of course puts a rather different complexion on the unexpected fall in the ILO unemployment rate… it certainly underscores the point that the improvement in the labour market is as patchy and imbalanced as the growth picture.

 Britain’s rapid growth has been largely consumer-led and policymakers want to see more exports and business investment to make sure the recovery is balanced and sustainable.

 Capital Economics says real earnings are 10 percent below their 2008 peak.

What’s more, there is evidence Britain’s new-found strength is not trickling down to the most in need. The number of people helped by Trussel Trust food banks soared to more than 900,000 in the last 12 months from nearly 350,000 in 2012-13, according to a report.

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