Labour Market, Scottish Economy

FAI comment on today’s labour market statistics

Today’s employment figures are a relatively bright spot for Scotland in the midst of a raft of poor economic news over recent weeks.

Unemployment fell by 26 thousand over the second quarter of 2016 whilst employment rose by 51 thousand. The boost to employment was further fueled by a drop in inactivity as more people re-entered the labour market.

Scotland witnessed the sharpest improvement in its unemployment rate over the quarter – a fall of 1.0 percentage points – of any English region or nation of the UK. Unemployment was down 12 thousand over the year, although the rate of improvement was lower than for the UK as a whole.

Today’s figures may seem somewhat surprising given the recent trend in economic statistics and the sharp revision down to growth by most economic forecasters. However, given the relatively weak growth in Scotland’s economy over the last year some bounce back was inevitable – indeed overall, Scotland’s unemployment rate of 5.2% is still higher than the UK rate of 4.9% although the gap has narrowed over the quarter.

It should also be borne in mind that these statistics largely exclude the post-referendum period. The data covers up to the end of June 2016. As we outlined in our Economic Commentary published last month, the emerging evidence from our modelling and business surveys had been pointing toward an improving outlook for the Scottish economy prior to the referendum.

The referendum outcome has turned this on its head. Consistent with the outlook from the Bank of England, we expect the decision to leave the EU to have a negative impact on employment and unemployment prospects in the months ahead unwinding today’s positive figures.



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The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.