Measuring Unemployment Some Key Terms Claimant Count (JSA) Labour Force Survey (LFS) The number of people officially claiming unemployment- related benefits must be actively seeking work All those actively seeking and available for work, whether or not they are claiming benefit Long- Term unemployed Labour force Full employment Discouraged workers Economically inactive Employment rate Unemployment rate People unemployed for at least one year The number of people of working age who are able, available and willing to work When there enough unfilled job vacancies for all the unemployed to take work People out of work for a long time who may give up on job search and effectively leave the labour market Those who are of working age but are neither in work nor actively seeking paid work The percentage of the population of working age in full- time or part- time paid work Percentage of the economically active population who are unemployed
UK Unemployment Rate (Labour Force Survey) Unemployment rate (per cent of the labour force) 14 12 10 8 6 4 2 0 Unemployment measures people without a job who have been actively seeking work within the last 4 weeks and are available to start work within the next 2 weeks. Jan- Mar 1971 Apr- Jun 1972 Jul- Sep 1973 Oct- Dec 1974 Jan- Mar 1976 Apr- Jun 1977 Jul- Sep 1978 Oct- Dec 1979 Jan- Mar 1981 Apr- Jun 1982 Jul- Sep 1983 Oct- Dec 1984 Jan- Mar 1986 Apr- Jun 1987 Jul- Sep 1988 Oct- Dec 1989 Jan- Mar 1991 Apr- Jun 1992 Jul- Sep 1993 Oct- Dec 1994 Jan- Mar 1996 Apr- Jun 1997 Jul- Sep 1998 Oct- Dec 1999 Jan- Mar 2001 Apr- Jun 2002 Jul- Sep 2003 Oct- Dec 2004 Jan- Mar 2006 Apr- Jun 2007 Jul- Sep 2008 Oct- Dec 2009 Jan- Mar 2011 Apr- Jun 2012 Jul- Sep 2013 Oct- Dec 2014
Unfilled Job Vacancies in the UK Labour Market Job vacancies in thousands 760 744 735 734 733 735 740 731 723 720 712 699 703 700 682 685 680 666 652 658 660 638 640 620 620 600 Jan- Mar '14 Feb- Apr '14 Mar- May '14 Apr- Jun '14 May- Jul '14 Jun- Aug '14 Jul- Sep '14 Aug- Oct '14 Sep- Nov '14 Oct- Dec '14 Nov- Jan 15 Dec- Feb 15 Jan- Mar 15 Feb- Apr 15 Mar- May 15 Apr- Jun 15 May- Jul 15 The chart shows the number of registered unfilled job vacancies this is often used as a guide to the strength of labour demand in the economy
Highest Unemployment Rates among EU Countries Source: Eurostat, May 2015 Unemployment rate as % of the labour force 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Greece Spain Cyprus Croatia Portugal Italy Slovakia Euro area France Latvia Ireland Bulgaria European Union Finland Slovenia 13.2% 12.4% 11.8% 11.1% 10.3% 9.9% 9.8% 9.7% 9.6% 9.4% 9.2% 16% 15.8% 22.5% 25.6% Greece and Spain have the highest rates of adult unemployment in the EU. Youth unemployment greatly exceeds the average adult rate.
Regional Unemployment Rates in the UK (July 2015) Unemployment rate 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% North East 8.1% London Yorkshire and The Humber Northern Ireland 6.7% 6.5% 6.5% North West West Midlands Wales Scotland United Kingdom 6% 6% 5.9% 5.6% 5.6% East Midlands East of England South East South West 4.7% 4.7% 4.5% 4.4%
Youth Unemployment Rate in the UK Youth unemployment rate (18-24 years old) 25.0% Source: Office for National Statistics Unemployment rate in percent 20.0% 15.0% 10.0% 10.6% 10.4% 10.4% 10.6% 10.4% 11% 12.2% 12.2% 13.3% 17.3% 17.9% 19% 19.3% 18.8% 15% 13.3% 5.0% 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Duration of LFS Unemployment in the UK economy Total unemployment, seasonally adjusted 3,000 2,500 In the last few years there has been a welcome fall in the level of unemployment 2,000 1,500 1,000 500 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Over 24 months 12-24 months 6-12 months Less than 6 months One of the big challenges for the UK is to make more progress in reducing long- term structural unemployment
Under- Employment Under- employment occurs when people are counted as 1. Looking for an additional job or actively searching for a new job with longer hours to replace their current (main) job 2. They want to work longer hours in their current job Under- employment can be rising even though unemployment is declining 000s 3,300 Estimated under- employment level in the UK economy 3,100 2,900 2,700 2,500 2,300 2,100 1,900 1,700 Source ONS, July 2015 1,500 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
The Rise of Part- Time Employment in the UK 20 18 16 14 12 10 8 6 4 2 % of part- time employment % of total employment % part-time that could not find full-time job (LHS) Part-time as % of total employment (RHS) 29 28 27 26 25 24 0 23 1992 Q2 1995 Q2 1998 Q2 2001 Q2 2004 Q2 2007 Q2 2010 Q2 2013 Q2 Source: Office for National Statistics A key feature of the UK economy in recent years has been a rise in part- time employment. By 2015 over a quarter of people worked part- time.
The Rise of Zero Hours Contracts in the UK Economy Total (thousands) 900 Zero Hours Contracts do not guarantee a minimum number of working hours each week % of people in work 3.0 800 700 600 500 400 300 200 100 0 People on zero- hours contracts are more likely to be young, part time, women, or in full- time education when compared with other people in employment. On average, someone on a zero- hours contract usually works 26 hours a week 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 In employment on a zero hours contract (thousands) Percentage of people in employment on a zero hours contract 2.5 2.0 1.5 1.0 0.5 0.0
UK Economic Growth and Unemployment 1.5 UK GDP growth, quarter on quarter 9 Unemployment rate Source: ONS Per cent 1 0.5 0-0.5-1 - 1.5-2 8 7 6 5 4 3 2 1-2.5 2007 Q1 2007 Q3 2008 Q1 2008 Q3 2009 Q1 2009 Q3 2010 Q1 2010 Q3 2011 Q1 2011 Q3 2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 2015 Q1 2015 Q3 0 2007 Q1 2007 Q3 2008 Q1 2008 Q3 2009 Q1 2009 Q3 2010 Q1 2010 Q3 2011 Q1 2011 Q3 2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 2015 Q1 2015 Q3
Budget 2016 Policies to Stimulate Jobs? Main corporation tax rate - currently 20% - to fall to 17% by 2020 The threshold at which people pay 40% income tax will rise from 42,385 now to 45,000 in April 2017 Annual threshold for 100% tax relief on business rates for small firms to rise New rail lines to get green light, including Cross Rail 2 in London and the HS3 link between Manchester and Leeds Tolls on Severn River crossings between England and Wales to be halved by 2018
Getting UK Unemployment Down Below 5% Requires sustained real economic growth reducing cyclical volatility Requires more balanced growth e.g. between the regions Policies need to make work and education investment pay Re- skilling the workforce in a fast- changing labour market A flexible labour market helps absorb external economic shocks Effective policies focus on the underlying causes
Inflation Rate in the UK Economy in Recent Years Inflation rate 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% A lower inflation rate means prices rise more slowly this is known as disinflation CPI inflation target = 2% Source: Office for National Statistics 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
CPI Inflation in the UK over the last 20 Years 7 Annual rate of change of consumer prices (%) Source: Office for National Statistics 6 5 4 3 2 1 0-1 -2-3 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 CPI all items CPI goods CPI services 2011 2012 2013 2014 The inflation rate for goods such as clothing and computing equipment has been, on average, lower than for service such as insurance and education
CPI and Core Inflation in the UK In Recent Years Annual rate of change of consumer prices (%) Source: Office for National Statistics 6 5 4 3 2 1 CPI All items Core CPI 0-1 Jan- 05 Aug- 05 Mar- 06 Oct- 06 May- 07 Dec- 07 Jul- 08 Feb- 09 Sep- 09 Apr- 10 Nov- 10 Jun- 11 Jan- 12 Aug- 12 Mar- 13 CPI All Items: Percentage change over 12 months Core CPI: Excludes energy, food, alcohol & tobacco Oct- 13 May- 14 Dec- 14 Jul- 15
Contributions to CPI Inflation in the UK Annual rate of change of consumer prices (%) 4.0 3.5 3.0 2.5 2.0 1.5 Other Education Transport & Package Holidays Electricity, Gas & Fuel Housing Food & Drink 1.0 0.5 0.0-0.5-1.0-1.5 2012 FEB 2012 APR 2012 JUN 2012 AUG 2012 OCT 2012 DEC 2013 FEB 2013 APR 2013 JUN 2013 AUG 2013 OCT 2013 DEC 2014 FEB 2014 APR 2014 JUN 2014 AUG 2014 OCT Falling Prices (Deflation) 2014 DEC 2015 FEB 2015 APR 2015 JUN 2015 AUG
Why is the rate of inflation in the UK so low? Falling global commodity prices including oil Slow wage growth in the labour market Falling food prices Continued price deflation in technology products Slower economic growth falling towards 2% Still some spare capacity on the supply- side
Why is inflation difficult to forecast accurately? Volatile global energy prices Forecast inflation for UK (source: BoE) Government indirect taxes can change Changes in value of the currency Volatile food prices Uncertain growth of aggregate demand The chart shows the UK CPI inflation forecast published by the Bank of England. The probability fan chart for inflation indicates the range of probabilities for inflation in the forecast period.