UK: Deloitte Monday Briefing: Britain's Booming Jobs Market

A personal take on economics from Ian Stewart, Deloitte's Chief Economist in the UK.

• One bright spot in the UK's economic performance has been the strength of the jobs market. The last three years have seen strong growth in the number of private sector jobs against what was, initially, a very shaky recovery.
• Today a record 30.4 million people are in employment in the UK. Since the labour market recovery started in 2010, the UK has generated an impressive 1.6 million new jobs. Within Europe only Germany, Austria, Denmark, Luxembourg and the Czech Republic have lower unemployment rates.
• The composition of the UK's job growth sheds light on the changing structure of the economy.
• The UK is seeing a shift to an older, more international, more female labour force where the private sector plays a bigger role.
• Almost half of the new jobs created since 2010 have gone to foreign born workers and almost 60% have gone to those aged over 50.
• Longer life spans and diminishing pension entitlements help account for the rise in the proportion of over-50s in the labour force.
• Meanwhile EU enlargement and the march of globalisation have led to a marked rise in the UK's foreign born workforce. The proportion of people working in the UK who were not born here has risen from 9% in to 15% in the last 10 years. Over this time period foreign born workers have accounted for the great majority of the job growth in the UK.
• Female participation in the labour force has risen to record levels, while male participation is lower today than at any time since 1971. Unemployment rates among women have been consistently lower than among men for the last 25 years.
• In its early stages part time work and, more recently, self-employment, have been significant drivers of the jobs recovery. Of the 1.6 million jobs created since 2010, about 40% were self-employed and a quarter part-time. Today a record 37% of all of those in work are either part time or self-employed.
• Part time work and self-employment have surged since 2008, suggesting that for some such work reflects the difficulty of gaining a full time job. (Nonetheless, in the last two years, growth in the number of full time jobs has easily outstripped growth in the number of part time jobs, suggesting that the recovery is gaining traction).
• Yet part time working has been trending up for 20 years and the majority of part timers, about two thirds, say they do not want to work full time.
• Much of the growth in part time work reflects the preferences of women who are playing a much bigger role in the UK labour force. The rise in part time work and the female workforce has paralleled a long decline in the number of people fully engaged in looking after the family and the home.
• Equally, while self-employment seems to have been boosted by the recession, this does not tell the full story. Self-employment has been on the rise for the last 10 years. And the pace of growth of self-employment has accelerated in the last year against a backdrop of strong recovery and a 25% rise in the number of job vacancies.
• Last week the Royal Society of Arts published a survey of 1000 "microbusiness" owners and reported that only one in four who set up in the recession did so to escape unemployment. 84% expressed themselves more satisfied than they would have been in a conventional job. But the report makes clear that self-employment is no easy option. On average the self-employed work longer hours and earn less than those in employment.
• One other significant trend is the expansion of private sector jobs. Public sector employment has been shrinking, and now accounts for 18.2% of all jobs (5.5 million people), down from 22.0% in 2009. Happily, growth in private sector jobs has more than compensated for those lost in the public sector.
• The trends in the UK labour market are positive, but problems remain. 2.2 million people are looking for work, of whom 800,000 have been unemployed for more than a year. A further 2.0 million part time and temporary workers would like to work longer hours. One third of all 16-17 year olds who want to work are unemployed.
• These numbers should improve markedly in the next year. Private sector employment will be the engine of the jobs recovery. It is a recovery in which older workers, foreign born workers and the self-employed are likely to play significant roles.

MARKETS & NEWS

UK's FTSE 100 ended the week up 0.5%.

Here are some recent news stories that caught our eye as reflecting key economic themes:

KEY THEMES

• The US economy contracted by 1.0% in Q1 2014, with much of the poor performance blamed on "the effects of the unusually cold and snowy winter weather"
• The Office for National Statistics said it would for the first time include illegal drugs and prostitution in UK GDP estimates, potentially increasing the size of the economy by between 4 and 5 per cent
• France's economy minister said that France is ready to "roll out the red carpet" to British investors "who will flee their country" if voters in the UK opt to leave the European Union
• Optimism among UK service sector companies rose at the fastest rate for 26 years in the 3 months to May, according to survey data
• Nationwide, Britain's biggest building society, warned that any measures to cool the London housing market could have "unintended consequences" for the recovery in the rest of the country
• Former US Treasury Secretary Larry Summers said in a speech that technological change represents "the largest challenge for capitalism going forward"
• High-demand for coco bonds, due to investors seeking for higher-yielding assets, has pushed yields to record lows according to an index compiled by Bank of America Merrill Lynch
• The Financial Times (FT) reports that Germany is considering the creation of special "cyber courts" to rule on clashes between individuals seeking to protect their privacy and search engines
• German industrial giant Siemens announced plans to cut 11,600 jobs as part of a major reorganisation of its business
• Reuters reports that the Bank of Japan has begun thinking about ways to exit from its 13-month-old quantitative easing programme
• The South Korean has risen more than 10% against the dollar in the last year – making it the best-performing currency in Asia – due to capital inflows and strong export performance
• One in five of the UK's largest public companies are facing investor protests over powers to raise funds without seeking approval from investors according to analysis of annual meetings conducted by the FT
• London is the most popular city for international retailers according to a survey by CBRE, with the UK capital having more retail brands on its streets than any other city in the world
• South African output contracted by 0.6% in Q1, with the Chamber of Commerce warning that the country "urgently requires open debate on ending and preventing debilitating strikes"
• De La Rue, the world's largest commercial banknote printer and passport manufacturer, reported a 37% rise in annual pre-tax profits in the year to March 29
• A behavioural sciences study from the London School of Economics claims that sunshine doesn't necessarily make people any happier, although the British obsession with talking about bad weather may make Brits more "miserable" – talking yourself down

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