The UK is more than 800,000 jobs short of the amount it would need to restore employment rates to those seen before the recession, a study from independent think tank the Resolution Foundation has found.
While the number of people in employment had climbed by 160,000 since 2008 to nearly 30 million, this positive news has masked the fact that the country’s adult population has grown faster over the same period – by 1.7 million.
The size of the UK jobs gap
The most comprehensive single measure of labour market conditions is the employment rate. It reflects the proportion of the population who are working. Unlike the employment level, the employment rate captures whether the economy is creating enough jobs for a growing population.1 It also provides a fuller measure of economic performance than the unemployment rate by capturing the level of economic inactivity – that is, people who are not in employment and not looking for work.
We start by looking at employment among the population aged over 16 before turning to employment among 16-64 year olds. When considering the broad population aged 16 and over, it is clear that the UK jobs market recovery has a long way to go. While there are more people in work than there were four years ago, since 2008 the UK population aged 16 and over has grown by 1.7 million. By taking account of this population growth, we calculate the size of the UK ‘jobs gap’ since 2008: the gap between the number of jobs being created and the number that are needed to keep a steady proportion of the population employed.2
As Figure 1 shows, in the past four years a large jobs gap has opened up. Today, returning the UK to its pre-recession employment rate of 60.3 per cent from its rate of 58.7 per cent would require the creation of 850,000 new jobs.
The road back to fuller employment
How long will it take to close the jobs gap and return the UK to its pre-recession employment rate? The answer depends on the speed of job creation and the pace of population growth. Changes in the age profile of the population will also have an important effect. For the population aged over 16, the ONS currently projects population growth of around 340,000 a year from 2013 to 2020. This means that employment needs to rise by around 50,000 in each new set of quarterly data for the employment rate just to stand still.
How optimistic would a more bullish view of the jobs market allow us to be? To answer this question Figure 2 also shows the results of three other scenarios for the future pace of jobs creation:
- First, as an illustrative and extreme upper bound, we consider the recent pace of job creation: the 580,000 increase in employment from Oct-Dec 2011 to Oct-Dec 2012.
- Second, therefore, we consider a more plausible but still optimistic upper bound scenario, replicating the strongest five year period of job creation on record that was not soon followed by a recession: the years from Nov-Jan 1994 to Nov-Jan 1999.
While this second scenario is more plausible, it ignores current plans for reductions in public sector employment. Specifically, the OBR currently forecasts a decline in general government employment of 500,000 between 2012-13 and 2016-17.
- Third, therefore, we consider a scenario in which private sector jobs growth proceeds at an optimistic pace and government employment falls in line with projections.
These scenarios bring home how far the UK jobs market recovery still has to run.
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