Unemployment (Labour Market, State of the South West 2011)

3.4.24 Whilst unemployment tends to be talked about as an economic negative, an element of unemployment is necessary to the efficient functioning of a healthy labour market providing the flexibility required for people to leave and re-enter the labour market. This is known as the ‘natural rate of unemployment’. During times of recession however, unemployment reaches much higher rates than the ‘natural rate’, causing hardship for those who are unemployed; and risk aversion and reduced consumption for those who feel their jobs are at risk. This can lead to further contraction in economic output.

3.4.25 The analysis of unemployment is based on two main sources:

Data collected and published using the ILO definition;

The number of people claiming unemployment related benefits (claimant count).

3.4.26 Unemployment (ILO definition): The widely quoted unemployment rate is the number of ILO defined unemployed individuals expressed as a percentage of the relevant economically active population.

Figure 3.4.8 Unemployment Rate: Economically Active (16+) Q3 2000 - Q3 2010

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Unemployment Rate: Economically Active (16+) Q3 2000 - Q3 2010 (Fig 3.4.8). Source: ONS.

3.4.27 In September 2010, there were 154,000 unemployed people in the South West - 5.7% of the economically active population. This was a 0.9 percentage point fall on the same month in 2009. The unemployment rate in the region has been substantially below the English average since 2000 (see Figure 3.4.8). During the recession, regional unemployment remained lower than the English average although, unsurprisingly, the rate rose sharply in 2008 - clearly showing the impact of the downturn on the South West labour market.

3.4.28 Historically, changes in unemployment lag changes in output measures and in previous recessions unemployment continued to rise and remained high for some time beyond the period of output contraction. This pattern was not observed in the 2008/2009 recession, however. Unemployment in the region began to decline at the end of 2009, surprisingly soon after the end of the recession. This was due in part to relatively high profitability prior to the recession, meaning firms retained staff during the recession and resumed recruitment in the early stages of the recovery.

3.4.29 Nationally, female unemployment rates are lower than those for males, although the gap in the South West has generally been less pronounced than elsewhere in the country. The recession hit male workers harder than females. Between September 2008 and September 2009 male unemployment grew by 3.6 percentage points (a 73.8% increase in the number of unemployed males), whereas female unemployment only increased by 0.9 points over the same period (a 22.0% increase in numbers). The corresponding figures for England were 2.5 points and 1.2 points, respectively. This caused a widening gap between male and female unemployment rates. Since the onset of the recovery, the male unemployment rate has fallen whilst female unemployment has risen slightly. Between September 2009 and September 2010 male unemployment fell by 2.3 percentage points, whilst female unemployment rose by 0.6 percentage points. The corresponding figures for England were -0.8 points and 0.5 points, respectively. In September 2010 the male and female unemployment rates were broadly similar.

3.4.30 Measuring economic inactivity is one way that so called ‘hidden unemployment’ can be captured. Hidden unemployment is thought to be a particular problem for women, who may drop out of the labour market altogether. The inactivity data however suggests that hidden unemployment is no worse for women than it is for men. Firstly, fewer inactive females want a job than inactive males. Secondly, with regard to the recession, male inactivity rates increased more than female inactivity rates.

Figure 3.4.9 Unemployment Rate by Age and Gender: Economically Active (16+) July 2009 - June 2010

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Unemployment Rate by Age and Gender: Economically Active (16+) July 2009 - June 2010 (Fig 3.4.9). Source: Annual Population Survey (NOMIS).

3.4.31 As shown in Figure 3.4.9, unemployment is lower in the South West for all age groups apart from the over 65s, following a similar profile to England as a whole. The highest rate is seen in the 16-19 year old group but, even in this group, the rates are still lower than corresponding figures for most other parts of the country. The next highest rate is found in the 20-24 age group: these groups have had consistently higher unemployment rates than those for older workers (since 2005), although the exact rates vary from period to period, perhaps in part caused by high statistical confidence levels. Youth unemployment is lower in the South West, possibly an indication of a healthy level of part-time working opportunities in the region for this group. While the region might be doing comparatively well, however, unemployment amongst young people remains a key challenge. Interestingly around 3% of economically active people over the retirement age are unemployed.

3.4.32 Unemployment data provides some indication of the ongoing impact of the economic downturn. The largest percentage point increase in the unemployment rate between Q2 2009 and Q2 2010 was recorded in the 16-19 year old age group. Over this period, unemployment in this group increased by 5.8 percentage points from 16.3% to 22.1% (although there are wide confidence limits associated with this change). This corresponds with anecdotal evidence that young people are having difficulty finding employment in the current conditions.

3.4.33 Sub-regional unemployment: The unemployment rate across the region ranged from 3.7% in South Gloucestershire to over 9.9% in Torbay in the year up to June 2010 (see Figure 3.4.10). All sub-regions in the South West saw unemployment rates of less than the UK average (7.7%) apart from Bristol and Torbay. During the recession, Bournemouth saw a significant rise in its unemployment rate, from a low of 2.7% in January to December 2007, to a high of 9.7 in the same period in 2009. Prior to the recession, unemployment tended to be higher in urban centres such as Plymouth and Bournemouth than in the more rural areas.

Figure 3.4.10 Unemployment Rate by County and Unitary Authority: Economically Active (16+) July 2009 - June 2010

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Unemployment Rate by County and Unitary Authority: Economically Active (16+) July 2009 - June 2010 (Fig 3.4.10). Source: Annual Population Survey (NOMIS).

3.4.34 As shown in Figure 3.4.11, the South West has lower unemployment rates than the English average for UK national workers, whether white or non-white. However, non-white workers in both England and the South West are much more likely to be unemployed than their white counterparts. The confidence levels for data on the ethnic minority workforce in the South West are very large and therefore these figures should only be seen as indicative.

Figure 3.4.11 Unemployment Rate By Ethnicity: Economically Active (16+) July 2009 - June 2010

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Unemployment Rate By Ethnicity: Economically Active (16+) July 2009 - June 2010 (Fig 3.4.11). Source: Annual Population Survey (NOMIS).

3.4.35 The claimant count is an alternative measure of unemployment which records the number of people claiming unemployment related benefits (Job Seekers Allowance (JSA) and National Insurance credits) on a particular day each month. It is not an official measure of unemployment but is the only indicator available for areas below local authority level and is timelier than ILO unemployment figures.

3.4.36 The South West claimant rate (number of claimants as a proportion of the working age population) has been below the national rate since January 1992, the start of the time series. Looking at the long term trend prior to the recession, the claimant rate ranged from a low of 1.2% to a high of 1.9% in the region in the period between April 2001 and October 2008, compared to between 2.0% and 2.6% for England as a whole.

3.4.37 In November 2010, the claimant count for the South West stood at 78,516, 2.4% of resident working age individuals. As with England as a whole, the claimant count rate rose dramatically following the onset of the recession, from 1.2% in April 2008 to peaks of 3.0% in April 2009, January 2010 and February 2010 – an additional 57,292 claimants between April 2008 and February 2010. The South West rate has, however, remained below the English average (which peaked at 4.1% in January and February 2010). Furthermore, between November 2008 and 2010 the region saw the joint lowest percentage point increase in claimant rate of the English regions. This suggests that the South West was relatively sheltered from the worst effects of the downturn.

3.4.38 Prior to the recession, the male claimant count rate was above the female rate in the South West and this persisted throughout the recession. In the early part of the recession (April 2008 to April 2009), the number of male claimants rose by 157.1%, exceeding the 131.4% rise in the number of female claimants. Though the male and female claimant count continues to exceed pre-recession levels, the number of male claimants has fallen substantially from its mid-recession high (70,100 in April and June 2009 to 57,000 in November 2010), whereas the number of female claimants has fallen by relatively little (from a high of 26,200 in October 2009 to 25,000 in November 2010).

3.4.39 As with the unemployment data, the younger age groups in the region appear to have suffered to a greater extent from weakening economic conditions, with the 20-24 year old age group seeing the highest absolute increase in claimants - an additional 3,330 between November 2008 and November 2010 (see Figure 3.4.12). This represents 18% of the total additional claimants for all age groups and combined with the fact that the 20-24 year old group make up only 10% of the economically active population, indicates that this group has been particularly badly hit. In November 2010, just under a fifth (19%) of all claimants was aged 20-24 and around 70% of this group was male. Although starting from a lower base, those aged 60 or over have seen a substantial increase in claimants rising from 845 to 1,155 between November 2008 and November 2010 with 93% of additional claimants being male.

3.4.40 Claimant count figures do not pick up those individuals who are unemployed but are not claiming (or not eligible) for JSA. Arguably those made redundant from well-paying jobs and/or taking early retirement are less likely to claim JSA as they are able to survive on their own resources for some time. In addition, it is argued that women are less likely to claim JSA than men if made redundant, which could go some way to explaining the low claimant rates observed.

Figure 3.4.12 Increase in Claimant by Gender and Age: November 2008 - November 2010

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Increase in Claimant by Gender and Age: November 2008 - November 2010 (Fig 3.4.12). Source DWP (NOMIS).

3.4.41 Long term unemployment remains an important issue. The longer individuals remain outside the labour market the harder it becomes to re-enter as their skills and thus employability deteriorates over time. The proportion of claimants registered for over 12 months has historically been lower in the region than for the nation as a whole. From the end of 2001 to the end of 2007, the percentage of claimants registered for over a year ranged from a low of 9.4% to a high of 13.1%. Between January 2007 and October 2008, the number of claimants registered for over a year fell from 6,015 to 3,385 - a 44% decline. From this point on, however, a rapid increase ensued with the statistics capturing those made redundant early in the recession – long term claimant numbers rose to a peak of 11,995 in April 2010 (13.5% of total claimants), but has subsequently fallen to 9,375 (12.0% of total claimants) in November 2010. The South West’s long term claimant rate has remained below the England average; 17.1% of total English claimants claiming for over 12 months in November 2010.

3.4.42 Sub-regional: Higher claimant counts tend to be recorded in South West England’s urban sub-regions. Figure 3.4.13 shows the change in claimant rates between November 2009 and November 2010 demonstrating how rates have responded to the economic recovery across the SW sub-regions. The largest percentage point decrease between November 2009 and November 2010 was in Swindon - a 1.2 percentage point fall (4.4% to 3.2%), but this follows the largest percentage point increase in the region between November 2008 and November 2009 (2.0 percentage points). Bristol recorded the lowest percentage point fall in claimants between November 2009 and November 2010 (-0.1 percentage points), suggesting that the 0.8 percentage point rise between November 2008 and November 2009 has persisted.

Figure 3.4.13 Sub-Regional Change in Claimant Rate: November 2009 - November 2010

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Sub-Regional Change in Claimant Rate: November 2009 - November 2010 (Fig 3.4.13). Source: DWP (via NOMIS).

3.4.43 In November 2010, Plymouth recorded the highest sub-regional long term claimant rate (17.1% of its total claimants), closely followed by Torbay (16.2%) and Bristol (13.3%). All areas of the South West were below the English average of 17.1%. At a district level, South Somerset, West Dorset and Taunton Deane have seen large percentage increases in the number of long term claimants between November 2009 and November 2010 with increases of 90.9%, 75.0% and 55.0% respectively (though absolute increases were small; 50, 30 and 55 respectively).