This yearís final set of labour market statistics ñ published today by the Office for National Statistics (ONS) ñ show that 2005 will prove to be a surprisingly spectacular year for jobs. But when set alongside disappointing economic growth it suggests that 2005 will also have witnessed the weakest growth in UK labour productivity since 1990, comments John Philpott, Chief Economist at the Chartered Institute of Personnel and Development (CIPD).
Jobs and productivity
John Philpott, Chief Economist says, ìGiven a tough year for the UK economy, the labour market has performed remarkably well in 2005, with well over 300,000 more people in work and pay pressures subsiding. But there is a sting in the tail. A combination of continued strong employment growth in the public sector ñ where measured productivity is low ñ and labour hoarding in private sector services is likely to reduce the annual rate of productivity growth to a trough not seen since the economy entered recession in the early 1990s. Despite the Chancellorís much stated policy aim to raise UK productivity, 2005 looks like ground zero.
ìInsofar as the economic slowdown has impacted on the demand for labour this has taken the form of reduced recruitment activity ñ as highlighted by CIPD quarterly surveys and ONS data showing that vacancies have been gradually falling since the spring ñ rather than job cuts with redundancies remaining at a historically low rate.
ìThe productivity trough means that the degree of cost pressure emanating from the labour market is greater than indicated by the headline average earnings figures. This in turn suggests that employers will be looking to cut labour costs in 2006. What this means for the labour market will depend in large on the strength of recovery in the demand for goods and services. But in any event employment growth is likely to be far more subdued next year than this.î
Unemployment and migrant workers
Philpott adds, ìThe puzzling juxtaposition of more jobs and rising claimant unemployment once again points to the significant impact of migrant workers on the UK labour market. As CIPD surveys indicate, employers are turning to migrants from the EU accession states in preference to UK jobless benefit claimants. The large increase in the active labour pool caused by migrants is also helping to keep pay pressures in check although there is so far little evidence that increased employment of migrant workers is actually forcing down pay rates.î
2005 set to be ground zero for productivity growth as slowdown hits recruitment
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