Labour market fails to take off (as usual)

Kaveh Pourvand, 17 April 2013

Today, while the country’s attention was elsewhere, saw the release of the latest ONS employment figures. The figures are less than inspiring.  Compared with last month’s figures, the employment rate has stayed the same at 71.4%, the unemployment rate has increased by 70,000 or 0.2% to 7.9% of the economically active population, and the inactivity rate fell by 0.2% to 22.2% (the lowest since 1991).

This month’s figures are not in themselves particularly noteworthy but they are symptomatic of the stagnant employment figures of recent times. This is the unemployment rate since 2010:

Source: ONS

With a few ups and down, unemployment has persisted at around 8% since the Coalition came into office. The average monthly unemployment rate in 2007 was 5.4%. The better news is that the employment rate appears to be marginally improving:

Source: ONS

The UK’s flexible labour market is creating jobs but not as much as one would like. Overall,  UK PLC appears to be travelling at much less than optimum speed. What is to be done? Some have said that this spluttering economy and job-market is the ‘new normal’. There simply is not enough demand to increase employment when both the state and the private sector is deleveraging. This certainly makes things difficult. However, it is simply not the case that all of the private sector is strapped for cash due to paying down debt. The corporate sector is literally sitting on a mountain of cash at £800 billion. Moreover, low-interest rates on government debt suggest that the markets are by no means signalling a blanket aversion to all forms of borrowing. Surely it’s time for a national infrastructure plan, to unlock that £800bn and get the economy moving.