Insight on Labour Market Statistics

Stephen Boyd is Assistant Secretary of the Scottish Trades Union Congress (STUC), with responsibility for economic and industrial policy, the environment, utilities, transport and arts and culture – see @stephenboydstuc


On Wednesday the latest Fraser blog patiently explained why some caution was required when interpreting what were ostensibly very positive new labour market statistics: the significant fall in unemployment masked rising inactivity and the big three-month increase in employment only took the 16-64 years employment rate back to where it stood a year ago.

It’s a tremendous boost to the quality of Scottish economic debate to have the revamped Fraser of Allander Institute now responding quickly and authoritatively to new data releases.

Further to the Fraser researchers’ analysis, I think the latest statistics throw up another three issues worthy of comment.

First, it is striking that women account for the entire rise in inactivity over the year. The surge in women’s inactivity over the last year is explained by both falling unemployment (-21,000) and employment (-15,000). Men have seen falling unemployment (-13,000) and inactivity (-4,000) combine to produce an increase in employment (15,000).

Change in level (000s), 16-64 years, May-July 2015 to May-July 2016, Scotland

stephenboydblog

Second, all age (all aged 16 years and above) employment increased by 51,000 between May-July with the over 65s accounting for 40% of the increase. Over the year the level of working age employment (16-64 years) was static but all age employment increased slightly (17,000). Since the January-March 2016 period all age employment (53,000) has grown significantly more than working age (34,000).

A higher employment rate for the over 65s raises a number of issues: the potential impact on young people if entry level jobs are increasingly taken by older people looking to supplement falling pension income; measures may be required to support older people in the workplace and demand for childcare services may increase if more grandparents remain in work. If this trend is sustained – which is by no means certain, we’ve seen similar increases in all age employment over the past few years only for a period of decline to follow – then the use of the 16-64 years as the standard measure of employment may have to be revisited. Or, at least, more attention will have to start being given to the all age rate.

Finally, despite the caution noted above, the reversal in the Scottish labour market since the end of last year is really quite impressive: in the period since January-March the unemployment rate has fallen by 1.5%, the employment rate has increased by 1% and inactivity increased by only 0.1%. But what explains this turnaround?

We know that growth in the first quarter of 2016 was flat (0.0%) and very weak over the year (0.6%). Survey evidence has been weak through the course of the year with PMI’s for Scotland regularly under-performing those for the UK. Unfortunately – some might say scandalously – there is no credible up to date sectoral information that might help make sense of recent trends.

Similarly, it is difficult to offer anything approaching a compelling explanation for the diverging fortunes of men and women in Scotland’s labour market described above. The poor relative performance of women over the past year follows an extended period between 2013-2015 when women’s employment increased very rapidly, relative both to men in Scotland and women across the rest of the UK. If anything, recent trends in the Scottish economy – primarily the problems in the oil and gas sector – might have been expected to hit male employment more severely. We know the fall in public sector employment has hit women (two-thirds of the public sector workforce) harder but it can’t account for the huge fluctuations in fortunes in the period since 2010.

Combining official, survey and anecdotal evidence fails to provide convincing explanations for either the very recent the upturn in the labour market as a whole or the declining relative fortunes of women over the past year. This is surely a concern.

The sample for the Labour Force Survey in Scotland has roughly halved since 1992. Perhaps it’s time serious questions were asked over its continuing accuracy?