July 2017

Labour Market Bulletin

Employment

The proportion of the population in work represents the demand for workers in the economy.

When more people are employed, we can deduce that employers are looking to expand. The outlook of the economy will be shaped by developments in the demand for workers as businesses often only look to expand if demand for their goods is high. Greater employment in response to greater demand translates into a healthier local economy.

The following table is a summary of employment statistics:

 Table 2

In contrast to last quarter, Warwickshire has seen a rise in the employment rate from 76% to 77%. This is the largest quarter-on-quarter rise in three years and can be explained through two channels. Firstly, more people have found work (either part-time or full-time) compared to the previous period, and secondly, the working-age population has shrunk. Although the former shows that we currently have a very buoyant labour market, the latter highlights our reliance on attracting workers from outside the county to keep up with the high business activity in Warwickshire.

The historical employment rates for Warwickshire have been mapped on the following graph:

 Graph 1

Warwickshire’s employment rate is currently higher than that of both England and the West Midlands. The graph indicates that this above-average performance has been the norm rather than the exception over the last seven years. In the last issue we discussed the possibility of the county’s rate stagnating - instead we have seen the first divergence from the national rate in 18 months.

Without doubt, an element of this unanticipated growth is a by-product of strong job market demand locally, but structural changes in Warwickshire are also playing a role. The consistently higher employment rate in the county alludes to a fundamental difference in the labour markets; a relatively large and growing older population that is leading to a falling participation rate. This bulletin focuses on this structural difference.

Table 1 indicates that the better-than-expected labour market performance was almost uniformly distributed among the districts and boroughs. Graph 1 maps the changes in the sub-regional employment rates for the two employment age categories.

Graph 2

Employment rate changes for 16 to 64-year-olds is at the top of the graph and 20 to 34-year-olds at the bottom. For all except Warwick, the employment rate has increased over the last quarter, with the largest rises coming in Nuneaton & Bedworth and North Warwickshire. It is positive to see the strong improvement in the employment rate in Northern Warwickshire. As was shown in our previous issue, the historical employment rates of Rugby, Nuneaton & Bedworth and North Warwickshire are more volatile and responsive to improvements in the economy. Large rises in the employment rates in these boroughs often coincide with a strengthening Warwickshire economy.

Drops in the employment rate within the so-called Magic Demographic (20-34) can also be representative of a healthy economy. Job turnover, or the movement of workers from one job to another, tends to be higher among young workers. In a buoyant labour market with relatively many job opportunities, it also tends to be easier to find work. A combination of the two could lead to relatively more young workers being temporarily unemployed as they move between jobs. This is referred to as frictional unemployment - where a fall in the employment rate is due to people voluntarily leaving their place of work.

If the fluctuation in the employment rate among this age-group persists, it will be important to understand the impact the National Living Wage (NLW) has on Warwickshire’s workforce. In April the NLW rose from £7.20 to £7.50, which is anticipated to cost approximately 15,000 firms £484 per year in Warwickshire (WCC research). Theory suggests this could have two opposing impacts: it could discourage job-seekers if firms are less willing to hire at the NLW, or it could improve working conditions and reduce job turnover.

 

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