If you read the FT yesterday morning (14 August) you received good news about the labour market, that “Only 4 per cent of those active in the labour market were out of work during the three months to the end of June, the lowest rate since the winter of 1974-75.” Less cheerful was the report that “the fall in unemployment failed to lift [annual] wage growth”, which fell from 2.5% to 2.4% compared to the previous three month period.
A reader of this article might conclude that 1) more people were working more, and 2) more people were paid more. A few people might have gone to the source, the Office of National Statistics website and downloaded the tables with the original information.* Those who did so and inspected tables 2, 3,7 and 16 discovered that both superficially legitimate inferences are wrong.
The first discovery (Table 2) is that while the total number of people 16 and older that were employed did increase by 42,000 from January-March to April-June,** all but 7000 of that increase was by men and women 65 and older. Employment fell by 35,000 for the 18-24 age group, by 9,000 for the 25-34 age group, and by 20,000 for 35-49 year olds.
Plowing deeper into the tables brings more bad news. Though total employment rose by the fore-mentioned 42,000, total working hours fell by 638,000 hours (Table 7). Full-time employees experienced this fall in hours worked, their average working week 0.2% lower than in the previous three months (part-time workers increased their hours by 1.0%). Plunging on to Table 16 we find that average weekly inflation-adjusted earnings in June 2018 were 0.1% lower than in June 2017.
How might we explain this rather strange combination of numbers – total employment up, but only for those 50 and older, total hours worked down, and real earnings lower? This combination tells a clear story – older people, especially the elderly, found it necessary to supplement their meagre pensions by whatever piece work they could find; while the vast majority worked less. Both results have a clear cause, the fiscal austerity of the Conservative government that has constrained the growth of private demand and reduced public employment (which fell continuously since the beginning of the year, Table 4[1]).
The FT article tells us that the fall in the headline unemployment rate is what prompted the Bank of England to raise its lending rate, interpreting that decrease as potential sign of “overheating”. If this is true, the members of the Monetary Policy Committee should have looked beyond the headline at the small print in Tables 2, 3, 7 and 16.
*References to tables from Dataset A01: Summary of labour market statistics.
**To seasonally adjust the ONS labour statistics use three month averages.
Photo credit: Flickr / Garry Knight