Consensus too gloomy on UK labour market
Simon Ward
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Widespread pessimism about labour market prospects has been fuelled by a recent fall in the stock of vacancies accompanied by a rise in claimant-count unemployment, as well as looming public sector job cuts.
Strong GDP growth in the second and third quarters, however, suggests that labour demand should be picking up. Such a scenario is supported by the Monster employment index, which tallies vacancies posted on corporate career sites and job boards. The index tracks or leads the official vacancies series and rose further in October, reaching its highest seasonally-adjusted level since December 2008 – see first chart.
Recent consumer survey evidence is also reassuring. Despite media negativity, the net percentage of respondents expecting unemployment to rise has fallen back after a post-election spike and is far below the recession peak in January 2009 – second chart.
The OBR forecasts a fall of 610,000 in general government jobs but this is scheduled to occur over five years – the projected reduction by March 2012 is only 60,000. Overall employment rose impressively during the 1990s despite a larger public sector decline – third chart.
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