Labour Market Data Insight: Q1 2019 – The Labour Market Is Booming, Isn’t It?
Welcome to the first PropertyPal Data Insight series which will focus on key issues facing the local and national economies.
Starting with an analogy – anyone who has ever flown on an airplane will know how important a development it has been for many people in society. Whether for business or pleasure it will have had a significant impact on many people’s lives. But how many people know how an airplane actually works? It’s something to do with forces such as lift and thrust, right?
In reality, the vast minority of people other than the engineers, the pilots and everyone else involved in the development process (and perhaps some aerodynamics enthusiasts) know how airplanes actually work. We simply accept that other people know what they’re doing, everything works simultaneously, and the airplane safely flies to the destination.
I use this analogy for anyone reading this to think of economic headlines in such a framework. There will be lots of headlines, some genuinely good, some bad and some indifferent. The point is, there is almost certainly more going on under the surface than the headline captures. Simply reading the headlines is a helpful gauge, but there are many components which lead to that final figure. The economy is intercorrelated with complex relationships and patterns that ultimately impact all of us.
From this article’s perspective, the labour market has been booming with successive good news stories about record highs in employment. For some sectors and cohorts of society it has been a hugely successful economic recovery, but not for everyone.
At PropertyPal we will dig beneath the headlines and try to give as much useful information as possible to our followers. After all, what’s happening in the economy, whether in the labour market, to our wages, to our spending patterns or ongoing Brexit developments, will influence what happens in the housing market.
This is the our first Data Insight Series focusing on what has been happening in the labour market in recent years. For example, did you know that the local economy has created 38 new jobs every day, on average, for the last 7 years?
We hope you find this information about economic developments useful and look forward to sharing these insights with you.
Labour Market Data Insight: 2019 – The labour market is booming, isn’t it?
The labour market performance in recent years remains one of the biggest success stories of the N.Ireland economy. The employment rate is over 71%, the highest it’s been since published data records began in 1992 and unemployment is at all time lows.
Local employers deserve credit with the vast majority of jobs created in the private sector. Furthermore, the increasingly tight labour market is feeding through to wage growth for workers after a long period of limited growth in earnings. Last year, a typical full-time worker’s annual salary increased by £1,000, or 4.0%. Over the same period the rate of inflation grew by 2.5% meaning workers received a ‘real’ pay increase of £415 once inflation is removed from the calculation. For comparison, a typical full time worker in Great Britain and Ireland got respective pay rises of £120 and €710.
In the last 12 months, there were 14,700 new jobs created of which 13,000 required full time workers. However, beneath the headline there is an underlying difference in performance between those classified as employees and those as self-employed.
Over 16,000 jobs were created for employee’s whilst the self-employed workforce fell by 1,800. However, despite overall self-employment falling, this was driven by a sizeable reduction in 4,000 part time self-employed, whilst full time self-employed increased by 2,200.
Monitoring self-employed numbers is important to give a feel for the wider economic performance and help understand whether it is a push v. pull motivation. Are people embracing their entrepreneurial mindset or are they driven to self-employment because of a lack of available opportunities via the traditional employee based route? Interestingly, recent research highlights that N.Ireland lags UK peers in entrepreneurial opportunities with the exception of the 25-34 age group which is amongst the highest.
Figure 1: Employment change in last 12 months by type and gender
Taking a longer-term view, the N.Ireland labour market has added almost 98,000 jobs since 2012. This equates to the local economy generating 38 new jobs every day for the last 7 years.
This improvement in the jobs market is equivalent to 12% growth and marginally outperforming the wider UK market growth of 11%. In Ireland, the labour market has grown by almost a quarter. However, not to be misinterpreted, the Irish economy’s labour market was most negatively impacted by the financial crash in 2008 shedding 15% of its workforce compared to 10% in N.Ireland and only 3% across the UK as a whole. As such, the all-island economy has been in ‘catch up’ mode, partially explaining the relatively better jobs market performance as people have been returning to work.
Figure 2: Employment growth over last 6 years compared to Ireland and the UK (2012 Q1=100)
Encouragingly, since 2012 there has been an eclectic sectoral pattern of job creation in N.Ireland, having created over 86,600 new employee jobs of which almost 70% are full time. However, a significant proportion of the recent job creation has been concentrated in lower productivity sectors, meaning they are typically lower salary and have a lower associated profit element.
The fastest growing sub- sectors in terms of job creation (see Figure 3) were:
- Residential care– the residential care sector has almost doubled in size over the last 7 years, in part driven by demographic change and an aging population. The sector has added over 13,000 jobs of which 63% have been full time.
- Employment activities– more commonly known as temporary working agencies, which, depending on your outlook, provide either a source of flexible working opportunities or is a symptom of an insecure labour market. The sector has added almost 10,000 new jobs with approximately 60% being full time.
- Food and beverage service activities– strong growth supported by a vibrant, expanding hospitality market. The sector has added 8,100 new jobs but only 33% have been full time work.
There has also been significant recruitment in higher value added roles across the professional services and ICT space, notably for computer programmers, legal and accounting staff and management consultants.
Figure 3: Top 25 sectors of employee job growth in N.Ireland split by full time & part time since 2012
Whilst this all sounds encouraging, at the reverse end there are 17/86 sub-sectors which have experienced reductions in the number of jobs over the previous 7 years. This is particularly confined to the public administration sector which has reduced by almost 6,500 full time staff and the ‘human health’ sector (including hospital and dental staff) has 4,000 fewer jobs. However, this has been through reductions in 5,700 part time staff but an additional 1,700 full time staff. Interestingly, this trend of increasing full time and contracting part time staff is reversed in the retail trade sector. Indeed, there are approximately 400 fewer retail staff members since 2012 of which the reduction is comprised of a sizeable contraction of 4,100 full time staff but offset by an increase in 3,700 part time. The challenges facing high street retailers are well known, notably with technological innovation displacing the need for human workers, squeezed consumer incomes and disproportionately high business rates.
Figure 4: All sectors which have decreased in the number of jobs in N.Ireland split by full time and part time since 2012
From a self-employed perspective the latest data shows more modest levels of growth over the last 7 years with an additional 10,500 workers. However, almost 80% of those roles are accounted for within the ‘Other services’ category. This includes jobs within the repair of computers and household goods and other personal services such as hairdressers, beauticians and personal trainers. In the absence of more detailed data it is difficult to fully attribute the headline growth number to more specific roles.
On the job losses side, the majority have been classified within ‘transport and storage’, ‘professional services’ and ‘retail.’
Figure 5: Self employment change by sector, N.Ireland, 2012-2019
Overall, the labour market data has remained continually upbeat in recent years, particularly as unemployment has reached record lows. However, a low unemployment environment has some notable implications;
- It should put upward pressure on wages as consumers have more bargaining power with their employers which should support household finances and boost consumers spending power;
- Skills shortages are more prevalent, especially as the possibility of importing a workforce solution reduces. A recent CBI/Pearson survey highlighted that 2 in every 3 businesses are concerned there will be a lack of sufficiently skilled people to fill roles; and
- It is very likely that the rate of job creation will slow in the coming years as there is a much lower pool of available workers. This exerts pressure on employers to retain their existing talent.
There is also considerable economic uncertainty surrounding the Brexit negotiations and it is rare that a week goes past where there isn’t a gloomy announcement. Indeed, the latest Purchasing Managers Index from Ulster Bank suggests the opening quarter of 2019’s performance was artificially boosted by firm’s stockpiling ahead of Brexit. This means the coming 6 months is likely to see weaker economic performance as firms run down their supplies.
To conclude, the labour market has been doing remarkably well and there are a lot of positives to take from it. However, there is work to do to ensure some of our highest value sectors continue to move up the list in terms of job creation. Let’s use the current position as a solid foundation as we move forward into more uncertain economic times.
This Autumn, PropertyPal will be releasing its first contribution in a new Economic Outlook series.
PropertyPal’s Economic Outlook series offers economic analysis and informative guidance to some of the biggest issues facing the global, national and local economies. Our suite of economic models for both the United Kingdom and N.Ireland provide forecasts of key economic indicators, which we hope will inform businesses, homemovers and the wider public of both opportunities and risks associated with the current economic climate as they emerge.
Jordan Buchanan – Chief Economist