Sharp fall in number of full-time employees dampens festive spirit in latest jobs figures

The latest Office for National Statistics (ONS) snapshot of the UK labour market shows a welcome fall in unemployment on both measures used by the Government. But, says Dr John Philpott, Chief Economist at the Chartered Institute of Personnel and Development (CIPD), the modest fall in unemployment disguises a quarterly drop in the number of employees in employment and a rise in the number of people without work who say they want to work but who are not recorded as unemployed.

Dr Philpott comments as follows:

Employment and unemployment
ëThere is a mix of good news and bad news in todayís latest ONS figures. The number of people in employment increased by 41,000 in the period August to October and there is a small fall in unemployment on both official measures. But the rise in employment is entirely due to more people in self-employment (up 72,000). The number of employees fell, with a particularly sharp fall of 123,000 in the number of full-time employees, this being especially notable for full-time women employees (down 73,000). With the level of job vacancies also falling, this suggests that the good news on unemployment should not be read as a sign of a significant pick-up in demand for staff.

ëAt the same time, the number of economically inactive jobless people who say they want a job increased by 41,000, dwarfing the 7,000 fall in measured unemployment. The rise in the numbers of economically inactive people is most noticeable amongst those looking after the family and home (up 24,000), again mostly women.

Public sector paradox
ëThe latest figures show a surprise, albeit small, rise in the level of public sector employment in the quarter to September 2006. The number of public employees has in fact risen slightly since the spring and returned to roughly where it was at the end of 2005. This looks paradoxical given recent talk about efficiency savings across the public sector but highlights the fact that the governmentís objective to date has not been to cut public sector employment overall but rather to switch staff numbers from back office functions to front-line delivery roles.

Pay pressures mounting?
ìGrowth in regular pay (i.e. excluding bonuses) in the private sector seems to be tracking the rise in Retail Price Index (RPI) inflation, while public sector workers are on average experiencing a real pay squeeze. This in itself does not signal an imminent pay surge. But with RPI inflation close to 4% at the outset of the key winter pay round it is vital that employers in all sectors remain firm in the face of demands for cost of living related pay rises. This might sound Scrooge like as we approach the festive season but too much generosity on pay in the coming months would result in a less than happy 2007 for interest rates and job prospects.î