As we move onto the latest wages and employment data for the UK more bad news has affected the UK motor manufacturing sector. As Autocar points out.
The news that Honda is set to close its Swindon manufacturing plant in 2021 is a major shock, and a huge blow. To the UK car industry. To Swindon. And, most importantly, to the 3500 workers set to lose their jobs – and the thousands of others who work at firms that supply and service it.
Grim news indeed for those affected. Autocar continues with an explanation of why this is happening.
You have to consider the decline in demand for diesel too: Honda’s Swindon engine plant produced diesel engines. Then there’s the ever-growing rise in popularity of SUVs, which is harming sales of traditional cars such as the Civic – the only model made in Swindon.
And you can’t ignore global trade, such as Donald Trump’s threat to impose huge tariffs on cars imported from Europe into the US – such as the Civic. At the same time, the European Union and Japan recently agreed a trade deal that effectively removes tariffs on Japanese-built cars imported into Europe. That reduces Honda’s need to have a European manufacturing base.
So ironically being in the European Union has made the decision easier for Honda as we also wonder about the next bit.
Is Brexit uncertainty a factor? Almost certainly.
Also Honda itself is not doing so well.
There’s also Honda itself. The firm continues to struggle in Europe, with sales markedly down on a decade ago. Last year it sold just under 135,000 cars in the European market, a three per cent decline on 2017 – and around half its sales of a decade ago.
As a result, it has increasingly focused production in its home country in Japan, at the expense of factories elsewhere. The Swindon factory produced around 160,000 Civic models last year, but at its peak ten years ago its output was around 250,000. This is the latest in a pattern of decline.
So much of this is familiar and let me add another trend which is that Japan Inc seems to be taking things home. Moving to today’s theme we will see lower employment from the motoring manufacturing sector as time passes and therefore presumably lower wage growth.
The real wages trend
Any downturn poses a problem for wages based on this from today’s release.
£494 per week in constant 2015 prices, up from £490 per week for a year earlier, but £31 lower than the pre-downturn peak of £525 per week for February 2008.
As you can see we are still quite some distance from the previous peak and that involves using the lowest measure of inflation they can find ( CPIH) as under all other measures the situation is worse. Just as a reminder the Rental Equivalence ( Imputed Rent under another name ) pillar of CPIH that drags it lower was roundly rejected by the Economic Affairs Committee of the House of Lords only last month. We do learn however that the main changes are to be found in bonuses and the like because the fall in regular pay has been much smaller.
£464 per week in constant 2015 prices (that is, adjusted for price inflation), up from £459 per week for a year earlier, but £9 lower than the pre-downturn peak of £473 per week for August and September 2007 and for February, March and April 2008.
Another way of putting it is to add up the total loss which this in the Guardian tried to do at the end of last month.
Wages are still worth a third less in some parts of the country than a decade ago, according to a report.
Research by the Trades Union Congress (TUC) found that the average worker has lost £11,800 in real earnings since 2008.
Firstly the employment situation continues to be really good continuing a trend that has been going for around seven years now.
There were an estimated 32.60 million people in work, 167,000 more than for July to September 2018 and 444,000 more than for a year earlier. The employment rate (the proportion of people aged from 16 to 64 years who were in work) was estimated at 75.8%, higher than for a year earlier (75.2%) and the joint-highest since comparable estimates began in 1971.
This has fed through over time into the unemployment numbers in another welcome development.
There were an estimated 1.36 million unemployed people (people not in work but seeking and available to work), 14,000 fewer than for July to September 2018 and 100,000 fewer than for a year earlier……The unemployment rate (the number of unemployed people as a proportion of all employed and unemployed people) was estimated at 4.0%, it has not been lower since December 1974 to February 1975.
The rate of fall of unemployment has slowed but then we would expect that as the number itself shrinks. Also these numbers are consistent with the other way of looking at the quantity situation in the labour market.
Latest estimates show that between October to December 2017 and October to December 2018: hours worked in the UK increased by 1.5% to reach 1.04 billion hours…..the number of people in employment in the UK increased by 1.4% to reach 32.60 million.
The combination of all of these factors has finally fed into some better wages growth.
Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 3.4% both excluding and including bonuses compared with a year earlier.
How you look at that in real terms depends on your inflation measure and whilst the official number is 1.2% for real growth we find that it shrinks as we look at the others but all of them now show a significant amount of real wage growth. So we are at least beginning to climb that mountain which will take us back to where we were in late 2007.
This is a much less positive area as we are left mulling this.
Output per hour – Office for National Statistics’ (ONS’) main measure of labour productivity – comparing this quarter with a year ago, decreased by 0.2% in the year to Quarter 4 (Oct to Dec) 2018. Output per worker decreased by 0.1% in the year to Quarter 4 (Oct to Dec) 2018.
Regular readers will be aware that I have my doubts about this number and in particular how they apply to the services sector which not only the dominant but an increasingly dominant part of the UK economy. Returning to what they tell us it is that the credit crunch saw a shift lower which unlike wages is not getting any better.
We find ourselves in something of a sweet spot for the UK labour market with wages and employment rising and unemployment falling. Even real wages are on the up and we should welcome that as we have been hoping for it for so long. The catch in today’s data is productivity and as it happens the monthly trend for wages which has gone 4% in October, 3.3% in November and 2.8% in December. That is pretty clear and is another way of putting weekly wages which were £527 in each month so no growth at all on that basis. The latter numbers tend to go in bursts so we await the next month.
As ever there is the caveat that the average earnings numbers ignore the self-employed who comprise some 14.8% of those in work.