by Tony Dolphin
The news that unemployment fell by 45,000 in the first three months of this year, compared to the last three months of 2011, is very welcome. It suggests the current recession in the UK – if it is not revised away when the next set of GDP data are released – is likely to be a very mild one. The drop in youth unemployment – by 18,000 in the latest three months – is further good news.
But there is reason to be cautious.
The labour market is not improving because firms are recruiting more full-time employees. It is improving because more people are taking part-time work, reluctantly, and because more people are setting themselves up in self-employment, possibly also reluctantly.
The 105,000 increase in employment in the latest quarter was more than accounted for by part-time workers. The number in full-time employment fell by 13,000. We know many of these part-time workers are unhappy because the Office for National Statistics asks part-time workers if they would prefer to be working full-time and 1,418,000 said ‘yes’ in the latest three months – the highest number since comparable records began in 1992.
Looking at the numbers differently, 90,000 of the 105,000 increase in employment in the last quarter is due to an increase in self-employment. Unfortunately, the ONS does not ask the self-employed if they would rather be working as an employee – but it is a fair bet that some of the recent increase reflects people who would rather not be self-employed but cannot find a company to employ them.
These are not new trends. The following table shows the change in employment over the last four years (i.e. comparing the first quarter of 2008, just before the recession, with the first quarter of 2012).
The big picture over this period is that total employment in the UK has fallen by just under 300,000. But the number of full-time employees is down by 800,000, while the number of part-time employees and the number of part-time self-employed people are both up by about 250,000. There has also been an increase over this period of over 700,000 in the number of people working part-time who say they are doing so because they want a full-time job.
The continuing legacy of the recession, therefore, is a labour market characterised by companies that are reluctant to take on more full-time employees and workers who are reluctantly working part-time – either for companies or for themselves.
Tony Dolphin is Chief Economist at IPPR