This morning has brought the focus back on the UK and the labour market release has brought some better news. Sadly the unemployment numbers are meaningless right now so we need to switch to the hours worked data for any realistic view.
Between April to June 2020 and July to September 2020, total actual weekly hours worked in the UK saw a record increase of 83.1 million, or 9.9%, to 925.0 million hours.
Average actual weekly hours worked saw a record increase of 2.7 hours on the quarter to 28.5 hours.
This is our first real look at a fullish set of data for the third quarter as we do not get the Gross Domestic Product or GDP numbers until Thursday. Will they also show a bounce of around 10%? Our official statisticians seem to have lost a bit of faith in their own figures as they quote the Markit PMI as back up.
The IHS Markit states that the recovery in business activity, which continued across the manufacturing and service sectors in September 2020, reflects the record increase in total hours worked on the quarter to September.
Perhaps they are unaware of the reduction in credibility for that series. However we can sweep this section up by noting that whilst we have much better news we are in a situation described by Foreigner.
But I’m a long, long way from home
That is because the numbers are still 12% below the pre pandemic peak of 1,052.2 million hours.
We had feared a rise in these, and sadly they have been coming.
Redundancies increased in July to September 2020 by 195,000 on the year, and a record 181,000 on the quarter, to a record high of 314,000 (Figure 3). The annual increase was the largest since February to April 2009.
In terms of what they tell us? We have an issue because we were seeing rises ahead of the further wind down and then end of the Furlough scheme which then saw a U-Turn extension to March. So much for another form of Forward Guidance. So the real message here is somewhat confused.
Using the tax system
This is a new innovation designed to give more timely data and to that extent it helps as we get a signal for October.
Early estimates for October 2020 indicate that the number of payrolled employees fell by 2.6% compared with October 2019, which is a fall of 763,000 employees……..In October 2020, 33,000 fewer people were in payrolled employment when compared with September 2020 and 782,000 fewer people were in payrolled employment when compared with March 2020.
These numbers have proved useful for a direction of travel but again due to the furlough scheme are much too low in scale. Also the wages numbers are best filed in the recycling bin.
Early estimates for October 2020 indicate that median monthly pay increased by 4.6%, compared with the same period of the previous year.
What they are most likely telling us in that job losses have been concentrated in the lower paid which has skewed the series.
Sadly the BBC seems not to be aware that these numbers are way of the mark and so are actively misleading.
The UK’s unemployment rate rose to 4.8% in the three months to September, up from 4.5%, as coronavirus continued to hit the jobs market.
The reason for that is the furlough scheme.
Experimental estimates based on returns for individual weeks show that the number of people temporarily away from work rose to around 7.9 million people in April 2020 but has fallen to around 3.9 million people in September 2020. There were also around 210,000 people away from work because of the pandemic and receiving no pay in September 2020; this has fallen from around 658,000 in April 2020.
Following international guidelines has led us up the garden path.
Under this definition, employment includes both those who are in work during the reference period and those who are temporarily away from a job.
We can now switch to the price of labour where according to out official statisticians there has also been some better news.
Annual growth in employee pay continued to strengthen as more employees returned to work from furlough, but pay growth was still subdued as some workers remained furloughed and employers were paying less in bonuses…..Growth in average total pay (including bonuses) among employees for the three months July to September 2020 increased to 1.3%, and growth in regular pay (excluding bonuses) increased to 1.9%.
As you can see below there were hard times still for some sectors.
During the early summer months, the industry sectors accommodation and food services and construction had seen the largest falls in pay, down more than 10% in April to June; in July to September, both recovered some loss although their average total pay growth remained down, at negative 1.8% and negative 3.9% respectively.
Actually the construction numbers seem curious as in my part of London it all seems to have got going again, but as ever London may not be a good guide.
We can see who is doing relatively well by switching to the most recent single month numbers which are for September. Here we see public-sector total pay was up 4.4% on a year ago. Also that the services sector has risen to 3,5%. Switching to manufacturing we see that annual growth has finally become positive but is at a mere 0.6%.
The improvement has followed through into the real wages data at least according to the Office for National Statistics.
In real terms, total pay in July to September grew at a faster rate than inflation, at positive 0.5%, and regular pay growth in real terms was also positive, at 1.2%.
In terms of actual pay those numbers mean this.
For September 2020, average total pay, before tax and other deductions, for employees in Great Britain was estimated at £553 per week in nominal terms. When expressed in real terms (constant 2015 prices), the figure in September 2020 was £509 per week, notably higher than the £488 per week estimated in June 2020.
It may be notably higher than June but is still below the pre credit crunch peak of £522 for the constant price series from February 2008. Actually that number looks a bit of a freak or more formally an outlier but even if we discount it we are still below some of the others from around then.
We find ourselves again mulling the way that conventional economic metrics have failed us. To be specific we see that underemployment measures are much more useful that unemployment ones as a 12% fall in hours worked gives a much more realistic picture than a 4.8% unemployment rate. In the short-term the improvement in the situation will clash with the November lock down and thus get worse. Although with the Hopium provided by the positive vaccine news from Pfizer there are now more realistic hopes for a better 2021.
Switching to the wages numbers I think there is a compositional effect making them also unreliable or rather more unreliable than usual. We even have an official denial to confirm this.
that is, if the profile (percentage within each industry) of employee jobs had not changed between July to September 2019 and July to September 2020, the estimates of growth in total pay and regular pay would have been 0.1% lower than reported in this bulletin.
In my opinion the numbers are not accurate enough to claim that. So we know more but much less than some try to claim.
By the way those pushing the 4.8% unemployment rate ( and thereby believing it) surely they should be pushing for the Bank of England to raise interest-rates as it is well below the levels it was supposed to?