UK becoming a part-time nation, figures reveal

The UK economy may have just been through a double-dip recession, but the labour market has performed remarkably well, considering.

The UK economy may have just been through a double-dip recession, but the labour market has performed remarkably well, considering.

In the darkest days of the crash, analysts were predicting that unemployment would swell to over 3m in the UK almost 10pc of the working population but those fears have not, at least so far, materialised.

The total number of jobless peaked at 2.7m between September and November (Xetra: A0Z24E - news) last year and has been healthily falling ever since. Official figures yesterday showed unemployment fell to 2.51m, a rate of 7.8pc, between July and September this year. Compared to the EU, with its unemployment rate of 10.6pc, the UK doesn’t appear to be doing too badly.

It is a question that has been vexing even the most astute economists: how can employment remain so high, relatively speaking, when GDP figures are sluggish?

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The Bank of England’s inflation report this week showed people are working longer hours than at the start of the recession but the official measure of output has been falling. On average, full-time workers are now clocking up 38.3 hours per week, compared to 37.7 in 2008-9. Private sector employment has grown since the middle of 2010, in line with the rise in hours worked, but this “contrasts starkly” with the weakness in private sector output growth, the Bank said.

Jonathan Portes, director of the National Institute of Economic and Social Research, said: “Overall, economic performance has been pretty dismal. There’s been little growth for two years but the labour market has responded to that very well. We’ve seen employers push through a reduction in hours and wages decreased. That’s unpleasant for many individuals but are we better off as a society? Yes.”

Figures from the Office for National Statistics yesterday laid bare the extent of the trade off for achieving relatively positive employment levels in the UK compared to the rest of Europe (Chicago Options: ^REURUSD - news) .

Part-time employment increased in the three months to September by 49,000 to 8.1m, close to a record high, while the number of people working part-time because they could not find a full-time job reached 1.4m, up 143,000 over the year. Almost half of the rise in employment is due to part-time working, the figures showed,

The number of people working in temporary jobs, also because they could not find full-time work, rose to 655,000, up 72,000 on the year.

Other figures from the ONS showed the weakness of the labour market: long-term unemployment rose by 1.4pc to 894,000, while those out of work for two years or more rose by 21,000 to 443,000. Youth unemployment, although having recently fallen below the 1m mark, stood at 963,000, or 20.7pc.

The anaemic jobs market has led to significant wage constraint, with employees working longer hours for less take-home pay. Average earnings grew by just 1.9pc year-on-year, dragging behind RPI inflation the measure traditionally used to calculate wages which hit 3.2pc in October.

Experts said businesses had continued to focus on keeping labour costs down through a combination of pay restraint and more part-time jobs. “Many employers remain cautious about adding to their long-term cost base. Business confidence has improved in recent months but is still fragile,” said Gerwyn Davies, adviser at the Chartered Institute of Personnel and Development.

But, Nigel Meager, director of the Institute for Employment Studies, warned Britain is in danger of moving towards a “low-wage, low-productivity” economy. “More people are working more hours, but productivity is less. The labour market is recovering but are we coming out of recession into a new trajectory which is a lower-productivity and lower-wage economy than we had before? Are we now seeing the effect of years of under-investment in skills and capital? Lower productivity has long-term competitive implications.”

He urged the Government to invest in creating highly skilled jobs rather than focus on low-paid jobs to boost figures.

Giselle Cory, analyst at research body Resolution Foundation, agreed the number of people working in low-skilled jobs because they cannot find something more suitable “is worryingly high and has been for some time”.

However, she said that more highly skilled managerial and professional jobs were becoming part-time and this shift time could mean the labour market is becoming more flexible.

Nevertheless, business groups warned that although it is encouraging to see more people find jobs in a tough labour market, this should not mask the “huge challenge” of youth unemployment and underemployment.