Employment: all is not as it seems

The employment rate is up, the unemployment rate is down. Redundancies have fallen and earnings appear to be growing twice as fast as RPI inflation. But all is not necessarily as it seems.

The number of payroll employees is up by 356,000 in June 2021 to 28.9 million, and above pre-pandemic levels in the North East, North West, East Midlands and Northern Ireland.

Redundancies have returned to pre-pandemic levels and there were 862,000 job vacancies in April to June 2021. But the pandemic distorts things — and that certainly seems to be the case for average earnings.

Compared with a year earlier, average weekly earnings (“total pay” including bonuses) were up by 8.6%. Regular pay, excluding bonuses, was up by 7.3%, or 6.6% if averaged over three months.

But temporary factors have contributed to that increase. Many were on furlough between last spring and summer, or had their hours reduced.

The Office for National Statistics (ONS) says the current improvement in earnings is “overstated”, while changes in the composition of the workforce is also contributing (with lower-paid people at greater risk of losing their jobs).

Rather than 6.6%, the ONS estimates that the underlying rate of regular earnings growth is between 3.2% and 4.4%.

https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment