Mixed signals from the labour market as women are hit hard by job cuts

The latest Office for National Statistics (ONS) employment and pay figures ñ published earlier today ñ send out mixed signals about the underlying state of the UK jobs market in early 2007. While employment is down and unemployment up, there are more job vacancies and growth in regular pay (excluding bonuses) has picked-up slightly. This, says the CIPDís Chief Economist Dr John Philpott, also explains why the Bank of Englandís latest Inflation Report remains very uncertain about the outlook for wage costs in the economy.

Dr Philpott commented on aspects of todayís ONS figures and the Bankís Inflation Report as follows:

Women bear brunt of sharp fall in number of employees
ìA fall of 55,000 in the number of people in employment in the January-March 2007 quarter comprises a sharp drop in employee numbers (down 100,000) partly offset by a rise in self-employment (up 45,000). This pattern has adversely affected women ñ particularly women in part-time work whose ranks shrank by 75,000. Although it is not possible from the ONS figures to offer an explanation for this the CIPD reckons that job cuts for women are largely the result of the ongoing programme of cutbacks in the public services, especially the NHS.

ìDespite this, women account for less than 40 per cent of a 13,000 quarterly increase in unemployment. This is because women are more likely than men to leave the workforce when they lose their jobs (women account for two-thirds of a quarterly increase of 85,000 in the number of people who are economically inactive i.e. neither in work or actively seeking jobs).

The vacancies puzzle
ìAt first sight it is puzzling to see a substantial increase of 32,000 in the level of job vacancies coinciding with falling employment. But the puzzle disappears when one considers the so-called ë3Rís effectí ñ commonly identified in the CIPD/KPMG quarterly Labour Market Outlook surveys ñ caused by the tendency for organisations to engage in a continual process of employment restructuring, involving simultaneous recruitment and redundancy. Unfortunately, people who suffer redundancy are not necessarily those best equipped to easily fill newly created vacancies, which leaves employers searching around for other sources of labour.

What will happen to pay?
ìOf critical importance for the pay outlook ñ and underlying inflationary pressure in the economy as a whole ñ is the degree to which the available supply of labour is able to fill the growing number of job vacancies.

ìThe central expectation of the Bank of Englandís Inflation Report is that pay costs could pick-up moderately in the coming months as demand for labour increases relative to supply, resulting in what the Bank describes as a modest reduction in the amount of slack in the labour market. The CIPD also considers this the most likely outcome ñ though as the latest CIPD/KPMG quarterly Labour Market Outlook survey, published earlier this week, clearly indicates there are signs that employers are finding it increasingly difficult to hire people with the kinds of skills or experience they are looking for. If this serves to put additional upward pressure on pay it could at the very least mean that it will be some time before we can expect any downward move in interest rates.î