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Blog posted by: Jacob Mohun Himmelweit (February 20, 2014)

Latest labour market statistics from ONS show that the labour market continues to move in a positive direction. But poor wage growth, still far below inflation, and the ongoing problem of underemployment suggest there is a long way to go before evidence of a recovery will be felt by the majority of people in the UK.

The headline news is undoubtedly positive: increases in full-time employment and decreases in unemployment, even for young people - welcome news indeed.

• 193,000 more people became employed between July - September and October - December 2013, with a majority of new employment in full-time work. 
• The unemployment rate for October to December 2013 was 7.2% of the economically active population, down 0.4 percentage points from July to September 2013.
• There are positive signs for young people as well. 49,000 16 to 24 year olds found employment since the period July to September 2013.The unemployment rate of young people (not in full-time education) decreased by 0.9 % to 18.2% over the same period.

However, causes for concern remain. Pay growth has been poor and unemployment is still relatively high, suggesting competitive pressure on pay is a long way off still.

• Total pay for employees rose by 1.1% between October – December 2012 and October – December 2013,while regular pay rose by 1.0%. Given that the Consumer Price Index increased by 2% between December 2012 and December 2013, this means real pay growth continues to be negative. 
• With unemployment at 7.2% there are still 2.34 million people unemployed and looking for work and 637,000 young people not in full-time education and looking for work. There were 580,000 job vacancies for November 2013 to January 2014. This means there are currently 4.1 unemployed people per vacancy, unchanged from the period July to September but down from 5.1 a year earlier.
• 1.43 million people report that they are only in part-time work because they couldn’t find a full-time job, down only slightly from the all-time high of 1.46 million in July to September 2013. This narrow definition of underemployment helps gauge the amount of slack which still exists in the labour market.

High levels of unemployment and underemployment suggest that, despite the positive news, we are still a long way from a positive labour market situation. Real pay continues to fall and there is little evidence that pay is going to be driven up anytime soon. The much-reported recovery is not being felt by the majority of those in work. Positive headline news needs to be taken with a pinch of salt, at least for now.