Industry watchers have expressed concern over the fragile state of the labour market following the publication of government statistics yesterday, amid fears that private sector job creation will be unable to offset heavy public sector job cuts.
The figures released by the Office of National Statistics showed a mixed picture for the three months to July. While unemployment fell by 8,000 to stand at 2.47 million, the equivalent of 7.8% of the workforce, the number of benefit claimants rose by 2,300 in August to 1.47 million. Analysts had expected unemployment to fall by between 35,000 and 40,000, however.
Moreover, although the number of people in employment rose by 286,000 to 29.2 million, representing a 0.4% increase – the biggest quarterly rise since 1971 – the number of job vacancies dropped by 14,000 to 467,000.
Graeme Leach, chief economist at member organisation the Institute of Directors, said: “The latest labour market statistics are a concern, despite the 286,000 surge in employment. Claimant unemployment is up and vacancies are down to their lowest level this year and all of this before the public sector shake-out has really begun.”
Public sector employment had dropped by 18,000 over the last year and the risk was that private sector employment growth would now slow, thus making it “insufficient to offset the crunching job losses expected in the public sector”, he added.
“Two things look certain over the next six to nine months. First, a softer labour market will put downward pressure on earnings growth. Second, industrial unrest in the public sector will multiply. At worst, we could be facing a winter of discontent. At best, I feel, a bad recovery,” Leach warned.
Nigel Meager, director of the Institute for Employment Studies, was equally worried. The rise in the claimant count was “an unwelcome reminder of how fragile the labour market remains” and suggested “a weakening picture”, he said.
The fall in the number of vacancies during the quarter was entirely the result of a “drying up” of job creation in the public sector, which was “barely offset” by limited growth in the private sector.
“The figures highlight how delicate the balance will be over the coming months and suggest that current private sector growth may not be adequate to ameliorate the impacts of reduced public sector employment,” Meager said.
As a result, John Philpott, chief economic advisor at the Chartered Institute of Personnel and Development (CIPD) called on the coalition government to introduce public sector job cuts more slowly by ‘back-loading’ 80% of them until after 2013.
He recommended that such cuts be limited to no more than 125,000, about one in five of those in the pipeline, between now and the end of fiscal year 2012 and 2013. This would mean that the majority of job losses would “fall closer to 2015-16 than 2013-2014”.
Because forward-looking indicators suggested that the UK jobs situation was about to take another turn for the worse, Philpott said: “It’s imperative that those cuts are implemented in a way that minimises adverse effects on the government’s wider objectives for growth, jobs, welfare to work initiatives and public service reform.”
Such a strategy would prevent total UK employment from rising above 2.8 million by 2012 because, while the rate of net private sector job creation will be “insufficient” to start offsetting the impact of public sector job losses before 2013, it should start increasing after that.
Moreover, a delay would also give staff at risk of losing their jobs more time to prepare for alternative employment and give those who remain more space to adjust to a changed workplace, “thereby minimising any negative impact of staffing cuts on public service quality”, Philpott said.
“A more aggressive approach to public sector job cuts would push unemployment close to three million and be especially harmful to those regions of the UK least well placed to enjoy an early and significant improvement in private sector employment,” he added.
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many factors in the equation ..
Now this is very odd
On the one hand various politicians are saying that a cap on immigration would harm the economy and more workers are needed to grow the economy and on the other, public sector workers will be unable to find jobs in the private sector – is this dilema all about the right kind of immigration?
There doesn’t seem to be any proper focus on immigration – the UK allows unlimited migration for anyone from the EU whilst shooting ourselves in the foot by restricting badly needed qualified workers from other countries; this simply doesn’t make sense
Most other countries have a logical policy for qualified migrants and a quota system for others – why is the UK unable to implement such an approach? Unfortunately at the lower end unrestricted EU migration only goes to only reinforce the ‘UK generational unemployed’ and the dole then becomes a lifestyle choice because migrants provide the labour for unappealing jobs
The rise in the ‘claimant count’ has always been in the system but masked over the past 12 years by government interference in the jobs market, encouraging the public sector to take on more employees than required – a form of cooking the books in the same way as raising the school leaving age, removing those on sickness benefit from the statistics etc. It all goes to demonstrate a pattern of deceit and sooner or later there has to be a reckoning which is now occurring.
Yes the labour market is fragile but this is a legacy that unfortunately needs to be addressed unless the government intends to underwrite the situation for ever more – or bail out the lucky few (BANKS) who were partly instrumental in this situation in the first place. Nevertheless, the country will still be left with an unfunded public sector pension pot which is an indefinate drain on every taxpayers pocket
In any event, surely workers will find their own level in the jobs market based on experience, age, ability, choice and all manner of other elements? So if there is not an equivalent private sector job then public sector employees would need to modify their criteria downwards until they hit the point where jobs become available. This is where the statement ‘a softer labour market will put downward pressure on earnings growth’ comes into play
Up until now in most other areas of the job market other than the public sector employees have been aware of the ‘no jobs for life’ concept and regrettably this is now being brought home to those in the public sector
Of course all this is against the pressures of removing the retirement age so there is less natural wastage at top end of the market and policies fixing the bottom end by encouraging everyone to go to university irrespective of suitability (another way of removing youngsters from the unemployment statistics)
Essentially like everything else (except the public sector) private sector jobs market is all about supply and demand