After yesterday’s news that inflation is not only rising but showing signs it will be here for the summer and autumn we have some better news for the UK economy today. It came from the labour market release.
The number of payroll employees showed another monthly increase, up 356,000 in June 2021 to 28.9 million…. For the first time since the beginning of the pandemic, some regions are now above pre-pandemic (February 2020) levels. These include North East, North West, East Midlands and Northern Ireland.
That is quite a monthly rise and provides some hope for the June GDP figures. There have been times in the credit crunch era where we have seen employment lead output in the official numbers. That is a reverse of economic theory but of course we have torn so many chapters out of those books. So after the 0.8% growth in May we can cross our fingers for June.
Next up on the hopium front was this.
There were 862,000 job vacancies in April to June 2021 – 77,500 above its pre-pandemic level in January to March 2020. All but one industry saw quarterly increases in their number of vacancies. In June 2021, the experimental monthly vacancies data, and the experimental Adzuna online vacancies data both continued to surpass pre-pandemic levels.
So both employment and vacancies had a really good June and let me praise our statisticians for speeding up their work and providing numbers for June as the previous system would only be at May. There are accuracy risks but especially at a time like this we are keen to be as timely as possible.
This coincides with what we were told last week by Markit/REC.
Permanent appointments growth hit a fresh series record, while the upturn in temp billings was among the fastest in the survey history. At the same time, vacancy growth hit a new series record.
As well as this from the Composite PMI report.
A rapid turnaround in staffing numbers continued in June,
led by additional hiring across the service economy.
Measured overall, the rate of private sector employment
growth was the strongest recorded since the series began in
So things here look good and ironically maybe a little too good in some areas.
In some key shortage sectors like hospitality, food, driving and IT, more support is likely to be needed to avoid slowing the recovery. ( Markit/REC )
Which has led to this response.
The government is to relax rules this month for how long lorry drivers can work, as a temporary fix for a severe shortage of qualified heavy goods vehicle (HGV) operators. ( Reuters)
For the unwary things look fantastic.
Growth in average total pay (including bonuses) was 7.3% and regular pay (excluding bonuses) was 6.6% among employees for March to May 2021.
Regular readers will be aware that I made a complaint to the UK Office for Statistics Regulation in March about this.
So after more than a decade of weak real wage growth that has been so poor we have failed to recover the previous high from 2008 we see that according to these figures all we needed was an economic depression.
There has been an effort to explain the numbers but sadly the headlines go around the world and have done so this morning.How often does the follow-up detail get read?
compositional effects where there has been a fall in the number and proportion of lower-paid employee jobs so increasing average earnings; and base effects where the latest months are now compared with the start of the coronavirus (COVID-19) pandemic when earnings were first affected and pushed down.
This to quote Carly Rae Jepsen this “really, really, really, really, really, really” matters because we are now telling people that UK real wages have recovered from the credit crunch slump. Next year when (hopefully) the economy has recovered we are likely to be wondering why real wages have hit trouble again when the issue is how it is measured not what is actually happening.
The Deputy National Statistician has written a bog explaining the issues which are exit effects via the annual numbers although he calls them “base effects” and compositional issues where last year lots of lower paid workers lost jobs. Thus if you then calculate an average you have a higher number even if no-one has had a pay rise, which is a pretty basic fail. Here are his thoughts.
Well, this month the headline regular earnings growth rate is 6.6%. We estimate that the base effect would reduce the headline rate by between 1.8 and 3.0 percentage points based on the two methods set out above. In addition, the compositional effect we estimate at 0.4 percentage points above pre-pandemic levels. This would give an underlying rate of between 3.2% and 4.4%.
So we have an underlying rate assuming he is right which is pretty much what we concluded for inflation yesterday ( of the order of 3.4%). So suddenly there is no earnings growth at all in real terms. I also note he had ducked the issue of bonuses so we know little more there.
Basically they do not know.
Our calculations of an underlying rate are there to help users understand base and compositional effects, but at risk of repeating myself, there remains a lot of uncertainty about how best to control for these effects.
So as people try to understand the economic effects of the pandemic they will be misled by the average earnings data which is why I reported them. Under the Quality standard “and should not mislead” is an objective.
These have proved especially useful during the pandemic due to the way the response affected the other numbers. For example whilst I welcome the fall in the unemployment rate to 4.8% we will not fully know the state of play until the Furlough Scheme is over.
The estimated 5% of businesses’ workforce reported to be on full or partial furlough leave in late June 2021 suggests that approximately 1.1 to 1.6 million people were furloughed within the industries surveyed in BICS.
You can drive a double-decker bus through that estimate when surely we should know how many we are paying?
The Hours Worked numbers continue to improve.
In March to May 2021, total actual weekly hours worked in the UK increased by 23.3 million hours from the previous quarter, to 981.4 million hours (Figure 5). This coincided with the relaxing of coronavirus lockdown measures, which had stalled the recent recovery in total hours.
But we have a fair way to go.
However, this is still 6.7% below pre-pandemic levels (December 2019 to February 2020).
From other numbers such as GDP we know May was an improvement and after today’s release we have bigger hopes for June. But for now they remain hopes.
There is a fair bit of good news around here. June seems to have been a good month for employment and if we return to the Markit/REC report we think there have been wage rises. It reported increases for both permanent and temporary staff especially in London.
A sharp rebound in demand for labour and a notable fall in the supply of workers led to further rapid increases in both starting salaries and temp pay. Permanent starters’ salaries rose at the sharpest rate since July 2014, while hourly rates of pay for short-term staff increased at the fastest pace since October 2004.
As for this month that should continue but it is also true that supply shortages are appearing in some areas and the recent spate of isolations due to Covid-19 may impact too.
Hundreds of staff at Nissan’s car plant in Sunderland are self-isolating due to “close contact” with Covid-19, the company has confirmed.
It comes amid a surge in cases of the Delta variant of the virus in the north east of England.
The company, which employs 6,000 people at the Wearside site, said production in “certain areas” had been “adjusted” as it manages numbers off work. ( BBC )
That impact depends on the line of work undertaken because if you have few symptoms many have got used to working from home.