Figure 3.1: South West and UK Unemployment Measures
Figure 3.2: South West long-term unemployment
Public sector adjustment
A major adjustment now taking place is the lack of strong job creation in the public sector and, indeed, a contraction in numbers employed. The effect is two-fold; in many ways the greatest impact is the loss of the job creation ‘prop’ that previously played an important role.
Between 1999 and 2009, over half of all jobs added in the region were in the public sector. These estimates are volatile, being subject to some reclassification through time, but indications are that the public sector share of total FTE employment increased by almost 2.5 percentage points. The loss of this important source of job creation will be a major factor in how the labour market performs, certainly over the next 2-3 years.
Indications are that public sector employment is declining faster in the region than elsewhere, falling from a peak at the end of 2009 (553,000 to 508,000). The region has experienced the largest absolute (exc. London) and relative declines in public sector employment. Between Q4 2009 and Q2 2011, public sector employment declined by 8.2% - significantly higher than the 4.6% seen nationally. This partly reflects its higher reliance on public jobs in the first instance, given a sharp rise in the preceding decade. A major question will be how successfully the private sector will be able to counteract the loss of public jobs (For a more detailed analysis of this, please refer to the recently released Economy Module and SLIM reports ‘Prospects for Private Sector Jobs Growth in South West England’).
At a national level, there has been a notable decline in full time (FT) employment, partially offset by an increase in part-time (PT) work. There are 1.0 million fewer FT jobs now than in June 2008, whilst an additional 200,000 PT jobs exist.5 This loss represents 5% of UK FT employment stock.
Data suggests that whilst the region has experienced a similar contraction in FT employment, the loss has not been as severe. Over the same period, the region has lost 55,800 FT jobs - representing a 3% loss. Figure 3.4 shows the majority of FT jobs lost in the region have been in manufacturing (47,600 out of the total 55,800) with real estate representing a further 9,500.
The major difference is that the region has not seen a similar increase in PT jobs. Since June 2008, PT jobs have also decreased by 40,400. As a consequence, the region is not benefitting from the partial offsetting effect.
In particular, the region has lost relatively more PT jobs in the retail, accommodation and food services sectors. Of the 40,400 contraction (which is a net figure and therefore encapsulating sectors that have had an increase in employment), 40,200 were in these sectors which have held up relatively well nationally, suggesting that consumers here are suffering more than elsewhere.
The shift to PT and temporary employment is not always a ‘voluntary’ decision. It is clear that, for many, it is necessity rather than
choice. The lack of permanent or FT opportunities result in many working fewer hours, or on a short-term basis. In 2008, only 8% of employees were ‘temporary due to a lack of permanent opportunities’, rising to 12.5% by the end of 2010. Similarly, 25% of employees were PT in 2008 due to a lack of FT opportunities, increasing to 32.5%: one in three PT workers would like to work FT.
Figure 3.3: South West Workforce Jobs - Recession and Recovery Periods
Self employment and earnings
It appears there has not been a significant change in self employment levels, with rate changes within the confidence intervals of the data. The most significant absolute fall has occurred in the West of England (WoE) LEP; whilst in Dorset, Gloucestershire and Heart of the South West numbers have increased marginally over the last 3 years. Normally self-employment is expected to increase in recessions, as a response for many who have lost their job. The quarterly numbers do tend to be quite volatile but the overall picture is that self-employment levels have not changed significantly in most areas.
Earnings have also adjusted due to economic conditions, again following a period of steady earnings growth. Nominal and real wages had increased since 2002, extending previous gains. Since 2009, however, average nominal wages have been broadly level whilst real wages have suffered a relatively sharp decline. With annual inflation consistently above 5%, real wages have been eroded considerably and this is likely to continue given pay freezes in the public sector and the private sector continuing to control costs.
Sections of the income distribution have been affected differently, exaggerating their relative market ‘power’. This is demonstrated by highlighting recent real wage growth (or lack of), broken into wage percentiles (10 percentile refers to the bottom 10% of earners, the 20 percentile refers to between 10% and 20% etc.) and shows us where real wages are eroding most.
Those earners between the median (50 percentile) and 75 percentile experienced the greatest relative decline - an annual real wage decline of 2.5%. This could reflect particular pressure in typical ‘middle-income’ sectors such as manufacturing and construction. In contrast - although still in real decline - wages of those at the bottom of the wage distribution were less badly affected. This suggests there has been some narrowing - albeit it marginal - between the bottom and mid-range wage earners.
Demand for labour
It is difficult to draw conclusions through analysis of vacancies as they tend to fluctuate from month to month. All broad occupations in the South West are oversubscribed, some considerably more than others. Overall, there were 3.3 claimants for every Jobcentre Plus vacancy in December 2011. The most competitive occupations were sales and customer services (5.1 claimants per vacancy) and elementary occupations (3.9). Competition for vacancies is highest in Gloucestershire and Swindon
& Wiltshire LEP areas, although the unemployment rate is close to the regional average. The Dorset LEP area, on the other hand, appears to have fared more favourably. Vacancies fell at a similar rate to the regional average but employment rose, and both unemployment and competition for vacancies are lower than elsewhere. Within the WoE, the indicators for employment and vacancies are positive, or at least vacancies did not fall as quickly as elsewhere.
Figure 3.4: South West Full-time and Part-time Job Changes (June 08 - June 11)
Conditions remain extremely difficult for young people in the labour market, with high levels of youth unemployment. Whilst unemployment among 16-24 year olds in the region has fallen in the year to June, from 16.7% to 14.8%, and is a lower rate than the England average (19.7%), it remains well above the overall working age population rate (6.1%). Given the deteriorating conditions in the second half of 2011, we would expect this figure to have increased. However, even at regional level, there are wide confidence intervals, and at a local level they become so wide the data is fairly unreliable. A more accurate (and timely) source of data on unemployment by age at a local level is claimant count - although this excludes those who may be unemployed but not claiming (or be eligible for) Job Seekers Allowance (JSA).
On this measurement, youth unemployment actually increased in the last year across all local authorities, following the regional and national trends. Youth unemployment (18-24 years) has risen from 4.6% to 5.7%, a similar increase to that seen nationally. There are particular concentrations of youth unemployment in Torbay, Swindon and Cornwall. There is also considerable ‘worklessness’ not captured through measurements of unemployment. Although policy focus has marginally reduced the numbers claiming Incapacity Benefit (IB), levels still remain high in many areas. There is a particular issue in urban areas in the south and west of the region - Torbay, Plymouth and Bournemouth - where broadly 1 in 12 people are either claiming IB or ESA.
Figure 3.5: South West Youth Unemployment