'Today's labour market statistics from ONS are very good, and confirm the slow, but steady improvement in the labour market situation, as the economy returns to economic growth.
'All the main indicators have again moved in a positive direction. Unemployment (on both the Labour Force Survey measure and the claimant count measure) is down, employment is up, and importantly full-time employment is now growing strongly. Total hours worked in the economy are increasing, and the level of job vacancies is back up to a level last seen in late 2008, suggesting more buoyant hiring activity from employers.
'All this is good news, but there still a way to go, and getting unemployment down from its current level of 2.45 million to the pre-crisis level of 1.6 million is likely to be a long hard slog, even if the current spurt of GDP growth continues. A key reason is that many businesses have a degree of slack in their workforces; they held onto workers during the downturn through the use of shorter working hours and pay freezes or cuts. As things improve they are now able to increase working time for the record numbers of 'involuntary' part-timers who want to work longer hours, and to respond to business growth through increases in labour productivity. It is notable from the latest statistics, that labour productivity is indeed beginning to recover after several years of stagnation, and that while total employment has increased by 1.3% over the last year, total hours worked in the economy have increased by rather more (1.8%).
'Another possible sting in the tail relates to pay. Today's figures tell us that earnings are still failing to keep up with the cost of living; indeed, if anything the gap is getting wider. As the economic recovery continues, there is a big question about how long employers can keep the lid on pay levels. Any future wages surge may have a further dampening effect on employment growth.'
