Labour Market Update, July 2014

19/06/14

Gross domestic product (GDP) is used to capture the state of the economy. It is the market value of all officially recognised goods and services produced within a country in a year, or over a given period.

Since 2013 GDP growth in the UK has been strong however the TUC’s Economic Quarterly report[1] comments that a return to the pre-recession peak is taking longer than expected.

At first glance employment continues to grow, however further investigation supports a correlation between this progress and the number of self-employed people in the UK rather than a marked uplift across the Labour Market.

The Labour Market

The latest labour market statistics show signs of improvement. Key figures from the Office for National Statistics (ONS)[2] show that unemployment is at 6.6%, the lowest rate since early 2009. Job vacancies are just below their pre-recession level, the ONS reports 628,000 job vacancies compared to 696,000 in 2008.

The Bank of England’s most recent Inflation Report[3] states that it is premature to say that a labour market recovery has taken place. There is concern that the rise in employment has been insecure, and includes low-paying self-employed workers.

Self-employed contractors keep unemployment down

Self-employment is keeping unemployment in the UK low, cushioning overall employment falls. Over half of all growth in the last year has been in this type of work despite only one in seven workers now working for themselves.

In June 2014 there were 780,000 more people in employment than in June 2013 however 40% of the current figure is self-employed. The latest job figures from the ONS show that there are now 4.54 million self-employed people, almost 8% higher than a year ago.

Over the last year the number of people in work increased by 722,000. The number employed rose by 1% and the number of self-employed people grew by 9%.

Long term financial concern

Research conducted by the Resolution Foundation[1] shows that earnings of the self-employed are falling; they dropped by a fifth between 2006 and 2010. There are also concerns on the financial stability of this group; recent figures from Citizens Advice[2] suggest that the self-employed are more likely to have debt problems.

Reliance on an ageing population

According to the ONS, the biggest rise in self-employment is among the over-50s, which is up 36% from 10 years ago.

Although there is a positive increase in the number of self-employed people the figure associated with entrepreneurialism (the registration of sole directors) has fallen. This could be evident of a wider shift towards unemployment and a struggle to find full time work rather than a shift towards enterprise and investment in start-ups.

A report released by the Resolution Foundation credits an increase in self-employment to a growing desire to postpone retirement. Self-employment is increasingly becoming an option to allow older people to keep earning by working less. The Economy’s reliance on this workforce could take a hit when this group of people working for themselves, suddenly declines.

Securing growth

There is a reliance on contractors to continue to perform despite the fact that self-employed workers often earn less, are largely from an ageing demographic, are more likely to be unemployed and have less job security than standard employees.

In order to support long term economic growth, recruitment needs to be on the agenda for business. A report released by REC/KPMG[3] draws upon data collected form recruitment consultancies and shows that we are already witnessing a marked rise in permanent workers; however two-thirds of businesses are concerned about the finding candidates with the right skill set. Businesses need to be supported through these issues to sustain the future growth of the UK’s economy.

Notes

This feature provides analysis of the UK’s labour market in July 2014 and includes assessment and commentary from business leaders and economic analysts.

[1] TUC Economic Report, June 2014 – http://www.ons.gov.uk/ons/dcp171778_363998.pdf

2 Key figures from the ONS – http://www.ons.gov.uk/ons/key-figures/index.html

3 Bank of England Inflation Report – http://www.bankofengland.co.uk/publications/Pages/inflationreport/default.aspx

4 Citizens’Advice – http://www.citizensadvice.org.uk/index/pressoffice/index/pressoffice/press_index/press_20140319.htm

5 REC/KPMG – http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/NewsReleases/Pages/report-on-jobs-shortages-fuell-rising-salaries.aspx