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UK – Unemployment down but labour market remains fragile

April 18 2012

The unemployment rate in the UK has fallen by -0.1% in the three months to April 2012, the Office for National Statistics (‘ONS’) announced today. This is the first fall since last spring as unemployment was down by 35,000 to 2.65 million over the period. The current figure now stands at 8.3%, dropping from its 12-month high of 8.4%. But although economists have welcomed this drop, caution remains in place over a fragile labour market in the UK.

Figures from the ONS reveals that the number of those claiming jobseeker’s allowance increased by 3,600 in March to 1.61 million, the highest since October 2009 but the smallest monthly rise since December 2011.

“If you look at the longer-term picture, unemployment rose quite strongly during the summer of last year, then the increases tailed off a bit towards the end of the year. So despite this latest decrease, the level of unemployment is significantly higher than it was a year ago, in fact it is some 170,000 higher than it was at the same point a year ago,” Nick Palmer from the ONS said in an interview with the BBC.

Brendan Barber, the general secretary of the Trade Union Congress responded by saying that “any rise in the number of jobs is welcome, [but] the fact is that full-time employment is still falling and a record 1.4 million are now stuck in involuntary part-time work.”

It was also revealed that the number of unemployed women rose by 8,000 in the latest quarter to 1.14 million, the highest figure in almost 25 years. A 53,000 increase in the number of people in employment to 29 million has also been reported, although this is down by 57,000 from a year ago.

The situation for young people has improved marginally as the employment rate for those aged 16 to 64 was 70.4%, up +0.1% on the quarter. In total, there were 29.17 million people in employment aged 16 and over, up 53,000 on the quarter. There were 9.27 million economically inactive people aged from 16 to 64, down 25,000 on the quarter and youth unemployment remains high at 22.2%.

Total pay, which includes bonuses, rose by +1.1% from a year ago while regular pay, which excludes bonuses, increased by +1.6 per year-on-year. Overall, bonus payments were lower in January and February 2012 than in the first two months of 2011, particularly in the finance and business services sector.

Dr John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development said  that “The jobs figures are a nice surprise. The labour market didn't just stabilise at the turn of the year, it actually picked up very slightly. Employment is up and unemployment is down, as is youth unemployment. There are more job vacancies and hours worked have increased. This good news on jobs suggests that the economy will have avoided a dip back into recession in the first quarter, although whether the recovery strengthens enough to deliver a sustained fall in unemployment remains to be seen and it's far too soon to rewrite the jobs forecasts.”

But he also warned of the fragile state of the labour market. “The rise in employment and fall in unemployment is mainly due to a sharp quarterly rise in the number of men working part-time, the vast majority doing so because [they are] unable to find full-time work. By contrast the number of women in work was broadly unchanged with female unemployment rising slightly. Indeed, these latest figures mark a change from the pattern of male and female employment growth seen throughout most of 2011 and may be the first clear sign that public sector job cuts are finally starting to have an adverse effect on women's job prospects.”

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