More encouraging employment news, but Mervyn King warns of shrinking growth

By Peter Hoskin
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The story on employment is becoming familiar but far from tired. Like last month and the month before that and the month before that, the latest labour market estimates contain many encouraging findings:

• Rising employment. In the three months to September, the employment rate was 71.3 per cent — an increase of 0.2 per cent on April-June. This translates to 29.58 million people in employment, which is over half-a-million more people in work than a year ago, and 100,000 more than the preceding three-month period.
• Falling unemployment. The unemployment rate stands at 7.8 per cent, a 0.2 percentage point decrease on the three months to June.
• Falling youth unemployment. In the last monthly figures, the unemployment level among those aged between 18 and 24 fell below one million. In today’s figures, it’s stayed there. Youth unemployment currently stands at 963,000, a decline of 49,000 on the three months to June.

Although there are same ol’ caveats to be made:

• Persistently high part-time employment. As I’ve mentioned, the number of people in employment rose by 100,000 in between April-June and July-September — but almost half of that increase (49,000) was accounted for by part-time work. There are now 8.12 million part-time workers, with 1.41 million of them working part-time because they couldn’t find the full-time work they wanted. Indeed, as this striking ONS graph suggests, much of the employment growth over the past few years has come in part-time jobs. This needn’t be a problem in itself, not least because part-time work can lead to further opportunities — but the Government will hope that those 1.41 million people find the full-time work they’re seeking as the economy picks up.
• The squeeze on living standards. Average pay (excluding bonuses) rose by only 1.9 per cent compared to the July-September period last year. This is, of course, significantly below the average inflation in prices over the same period.  By the Consumer Price Index, annual inflation stood at 2.7 per cent yesterday — and, as Andrew Lilico wrote, could well get worse. The cost of living

And some (relatively) new caveats, too:

• A rising claimant count. The number of people claiming Jobseeker’s Allowance rose by 10,100 to 1.58 million in October. This is the biggest increase in the past year, but it’s worth noting that the total is still lower (just) than last October’s 1.59 million. I plan to write a post on how the claimant count can stay more or less flat, while employment rises, in the not-too-distant.

And then there’s perhaps the biggest caveat of all: the general economy is still in a rather precarious position. Indeed, Mervyn King — launching the Bank of England’s latest quarterly inflation report — has today said that economy could shrink in the final quarter of this month. The report itself warns that “the UK economy may be in a period of persistently low growth.”

Given the Bank’s shoddy inflation forecasts, we might be tempted to dismiss such dire predictions, but I’d say there’s actually a strong likelihood of these ones coming true. The situation in America, with the on-going discussions to avoid the fiscal cliff, is cause enough for concern — and that’s even before we consider the Eurozone and Britain’s own post-Olympics comedown.