Labour supply indicators are crucial in assessing an area's current economic performance.
Unemployment, economic activity, qualifications and labour productivity are regarded as forming the ‘potential supply of labour’ and these are essential in forming economic policy and investment decisions. For example, the amount of slack in the economy – the gap between demand and potential supply – is a key determinant of wage growth. A smaller gap or less slack (i.e. the more people are in work) means businesses have fewer workers to choose from for each position, which subsequently increases the bargaining power of the worker. More bargaining power translates into increases in wages and thus, wage growth.
The following table is a summary of unemployment statistics:
Last issue we saw a rise in the unemployment rate from 3.3% to 3.4%. This quarter, however, the unemployment rate has fallen from 3.4% to 2.9%. This would suggest that increasing job vacancies, strong business confidence and an increase in labour force participation have helped to reduce the number of unemployed by 1,100 people. The fall in the unemployment rate was the first in two years in Warwickshire and we have, once again, widened the gap with the national rate.
This relatively large fall reinforces the view that Warwickshire has a tight labour market – those who wish to find work can find work relatively more easily in the county compared to nationwide. The following graph depicts the current unemployment rate relative to the 20-year average.
Even when taking into account the effects of recessions, every area (with the exception of Rugby and Stratford-on-Avon) in the sample has a current employment rate lower than its 20-year average. This implies that the current number of job-seekers is lower than it has usually been in the last 20 years. A tight labour market should result in wages growing over the coming months.
Graph 5 maps the historical changes in the unemployment rate across Warwickshire.
There have been no large changes in the unemployment rate in the sub-regions of Warwickshire. Stratford-on-Avon continues to have the lowest unemployment rate, although it has been gradually increasing over the last 18 months. In contrast, Nuneaton & Bedworth’s unemployment rate has almost halved in six years and declined in four consecutive quarters. Latest GVA data released by the Office of National Statistics also indicates that the borough is the fastest growing area, in terms of GVA, in Warwickshire.
The rise in out-of-work benefits in Warwickshire will be swayed by the introduction of Universal Credit. Rugby and Stratford-on-Avon have two of 11 Jobcentres in Central England Group delivering Universal Credit Full Service. Instead, it is more informative for us to focus on the change in long-term unemployment, as calculated by those claiming Jobseekers Allowance for over 12 months.
Taking October 2004 as the reference point for England, West Midlands and Warwickshire, we can see the evolution of the long-term unemployed over 13 years in Graph 6. The two ‘humps’ highlight the impacts of the double-dip recession. The data suggests a greater level of resilience in the Warwickshire labour market. Not only did long-term unemployment recover more quickly after the initial recession, the subsequent recession was also less severe. The result is that only 0.1% of Warwickshire’s population now claim for over 12 months compared to 0.6% in the West Midlands and 0.4% across England. Since 2004 this has decreased 28% in Warwickshire, but increased 53% in the West Midlands and 21% across England.