Employment level hits new peak (but warning signs abound...)

Official figures show that UK employment has reached a record high of almost 29.4m people in work, although there are plenty of signs that things could be about to change.

Figures released by the Office for National Statistics reveal that the number of people seeking jobseekers' allowance declined by 10,800 in January to 794,600 - the sixteenth consecutive drop, and the first time the total has fallen below the 800,000 barrier since 1975 - while there are currently some 677,400 job vacancies in the UK economy.

All this encouraged employment minister Stephen Timms to claim that "We continue to have a strong and stable labour market, with both record numbers in employment and the lowest claimant count since records began in 1995."  The positive picture was reinforced by the Recruitment and Employment Confederation's latest research findings, which point to continuing strong performance and increased optimism about employment growth prospects following a good 2007.  According to REC director of research Roger Tweedy, "Feedback from agencies on our steering group confirms that this pattern has continued into 2008 with January results ahead of forecast.  The uncertainty in the wider economy has not yet hit recruiters."

Yet, while redundancies are also at their lowest level since records began in 1995, the picture could be about to change.  The latest quarterly CIPD/KPMG Labour Market Outlook suggests that more than a third (38%) of employers plan to make some redundancies this quarter - more than double the figure for the previous quarter.

And John Philpott, chief economist at the CIPD, has identified a couple of ‘conundrums' from the latest official figures.  Alluding to what he called ‘the buoyant jobs market conundrum', he said: "If it weren't for the fact that most economists are forecasting an economic slowdown this year, today's jobs figures would be a cause for celebration: another big rise in employment, falling unemployment, and pay pressure posing no great threat to price inflation.  What is surprising is that the ONS figures show no sign whatsoever of the softening in demand for staff identified by various recent independent employer surveys, including the CIPD/KPMG Labour Market Outlook survey published early this week.  The apparent conundrum might be explained by the normal lag between turning points in economic activity and the eventual labour market fall out. But it might also indicate that the jobs outlook isn't so bleak after all.  Let's hope for the best - but don't be too surprised if things soon start to take a turn for the worse."

And of the ‘older workers/migrant workers conundrum', he added: "Taken at face value the ONS figures suggest that most new jobs at present are going to people aged 50 and over - this age cohort accounts for almost 6 in 10 of the additional people in work last year.  But this sits oddly with the observation that most new jobs are being taken by migrant workers - a group overwhelmingly aged under 40.  The CIPD reckons this conundrum is explained by the fact that migrant workers are taking the lion's share of new job vacancies while older workers are instead better able than in the past to hold onto their jobs.  In jargon terms, over-50s employment is rising because of increased job retention, not increased hiring of older workers.  What this also highlights is that home-grown workers, not just those from overseas, have benefited from the jobs boom of recent years.  It remains to be seen which groups will fare best when the jobs market next enters tougher times."