Employment market update

UK market statistics

As expected, UK unemployment has now breached the two-million barrier, hitting a total of 2.03m according to the latest official figures - the highest level since July 1997.  In February, 138,400 more people claimed unemployment benefit - the biggest increase since records began - taking the total to some 1.4m, a rise of 600,000 in the past year alone.  This puts the jobless rate at 6.5%.

The unemployment figures have been accompanied by a record fall in job vacancies and a record rise in redundancies.    The latest REC/KPMG Report on Jobs shows the demand for staff falling at its fastest rate for more than a decade.  REC chief executive Karen Green says "It is clear that we have not yet hit the bottom of the jobs market."

With jobs currently being lost at the rate of one every 25 seconds, the jobless total is expected to peak somewhere over three million.  The British Chambers of Commerce are predicting a figure of 3.2m - just over 10% of the workforce - while most independent economists (including Bank of England MPC member David Blanchflower) expect the total to peak at somewhere between 3 and 3.5m by the end of the first quarter of 2010.  Global Insight's Howard Archer is also talking in terms of a 3.3m peak, but sets its arrival a little later - around late 2010 to early 2011.

Drilling deeper: gender, age...

Look further into the jobless total of 2,029,000, this includes some 1.2m men and 811,000 women.  The unemployment rate for men now stands at 7.1%, notably higher than the national average of 6.5%.  By age, the highest number of people (900,000) are in the 25-49 bracket, although there's some evidence to suggest that it's both the young and the old who are feeling the impact on the job market most.

According to the Employers Forum on Age, older workers are finding it particularly difficult to secure employment.  Unemployment is apparently increasing 44% faster than the national average for the over-50s, while job-seekers in this age-range are three times more likely to remain unemployed for 6-12 months than those aged 25-49.  EFA chief executive Catharine Pusey believes that "disproportionately targeting older workers for redundancy" is bad for business, and urges employers to "judge workers not on their age but on their ability."

At the opposite end of the scale, more than a quarter of 16-year-olds are failing to find work.  Charity Barnardo's says the joblessness rate for 16-17-year-olds is 28%.  Its chief executive Martin Narey is calling for "a more relevant education system with greater recognition given to vocational and work-based learning" as the economy slides deeper into recession.  And even for the wider 16-24 age group, unemployment is running at over 15%.

... sector, region...

In sector terms, it's jobs related to the construction industry that are disappearing fastest, with architects at the top of the list, followed by technologists/planning technicians, managers, surveyors, engineers, bricklayers, carpenters and scaffolders.  Other professions, including veterinary medicine and law, have also been hit hard.  And with industrial production forecast to contract by 8.2% this year, the EEF is predicting that more than 140,000 manufacturing jobs will be lost, with car firms likely to be among those worst hit.  Demand in the manufacturing sector has hit a record low, with the employment subcomponent of purchasing managers' institute index on 33.2, the lowest figure since the survey began in 1992.

In the City, February hiring activity was some 62% down year-on-year, according to Morgan McKinley's latest London Employment Monitor.  A report from Manpower said that more companies in the capital plan to reduce, rather than increase, staffing levels for the first time since 2005.  (According to the TUC, the national average for job-seekers per vacancy is around ten, but in the South-East it's sixty.)

And although London is being particularly badly hit because of the impact on the City, a new report from Oxford Economics predicts that the regions could take much longer than the capital to recover from the effects of recession.  While employment in London and the South-East could recover to pre-recession levels within five years, the report suggests that a similar recovery could take more than a decade in the North, the West Midlands and Wales.

The international picture

US unemployment is at a 26-year high after unemployment hit 8.1% last month.  This means that 4.4m people have been made redundant since the recession began in December 2007 - half of them within the last four months alone.  The cumulative loss is the worst since American troops demobilised at the end of the Second World War.

Meanwhile a new report (‘Creating People Advantage in Times of Crisis: How to Address HR Challenges in the Recession') from the Boston Consulting Group and the European Association for People Management says that a third of companies across Europe are planning to cut their full-time workforces - and the country with the highest proportion (57%) of companies planning major redundancies for full-time employees just happens to be the UK, reflecting the severity of the domestic downturn.

Learn from history - avoid making the same mistakes

But the report also urges organisations to learn the lessons of past recessions "in order to build a sustainable and high-performing workforce for the future."  Reiner Strack, a co-author of the report and a senior partner in BCG's Düsseldorf office, warns companies to act with great care when shedding jobs.  "In the last recession, companies cut employees to save money, only to discover key shortages a few years later" he says.  "In some countries, the future recruitment challenges confronting companies will be especially acute, because the size of the workforce is set to decline as a result of a ‘double whammy' of factors: falling birth rates and the rising number of ‘baby-boomers' entering retirement."

The report also showed that some of the other cost-saving initiatives taken during the last recessions (such as cutting back on things like corporate events and bonuses related to company performance) not only proved to be relatively ineffectual but also had an unfavourable impact on employee commitment.  EAPM board member and CIPD director of research & practice Linda Holbeche says "Companies should review people strategies deployed during the last recession to avoid using interventions which have been proven over time to be ineffective."

Finally, the report urges the adoption of an action plan that helps businesses to reduce their costs in a way that won't jeopardise their prospects when the crisis comes to an end.  Philip Krinks, partner and MD of BCG's London office, says: "Despite the colossal pressure business leaders are under, they still have choices.  They can significantly shape the destiny of their companies.  During 2009, as well as responding to the pressures, companies have opportunities to prepare for when the recovery eventually comes."

‘Bottom of the global pile'?

That recovery may not be as soon as everyone would like, of course.  Among other factors, Britain's peculiar vulnerability is caused by having arguably the highest level of personal debt in the world, which could lead to a ‘debt deflation trap' with individuals continuing to go further into the red despite falling prices.

Some of the recent press stories about the economy might make you want to laugh (probably hysterically) at their unrelieved pessimism.  The IMF continues to assert that the British slump will last longest (until at least 2011), while the latest ONS figures suggest that the UK economy is on course for its worst year since 1931.  Morgan Stanley reckons that things will actually be worse than the great depression, when UK profits fell by 57%; this time, predicts MS, they'll be down by 60%.  And Numis Securities has apparently warned potential foreign investors in the UK that house prices could fall by a further 55%, and that Britain could be facing bankruptcy.  But of course, nobody actually knows.

Crumbs of comfort

Even now, there are still a few positive factors to report.  The public sector remains relatively buoyant, despite chief treasury secretary Yvette Cooper's recent call for further stringent efficiency savings in all government departments and quangos.  Several leading specialist recruitment agencies have reported that activity remains steady in the sector, while the CIPD recently went so far as to describe the public sector as "a recession-free zone".

The government has outlined a new low-carbon industry strategy that, it's hoped, could result in the creation of some 400,000 jobs.  (The Prime Minister has described the plan as "central to the economic recovery", no less.)

And there's ample opportunity for employers to make more of their employees' existing skills, according to a new report from the Work Foundation.  The survey (of 2,000 employees) revealed that 40% of respondents possess skills more advanced than their work actually requires, while 65% said their work was too rule- and policy-bound to leave any scope for creativity and innovation.  WF associate director Ian Brinkley said that while employers appeared reluctant to lose the skills, talents and experiences of their workforces, they were also failing to make the most of them.

We'll leave the last word to Badenoch & Clark MD Neil Wilson, who urges employers and employees to look beyond the raw figures.  "If the business community only looks at the raw numbers, it can be easy to paint a desperate picture of the current job market," he says.  "The bigger picture tells a different story, though.  Yes, the economic downturn has led to redundancies, but it's also led to a need for quality people to help organisations weather the storm.  Times are definitely more competitive but, taken at face value, the raw employment figures paint an impossible picture for many candidates.  The reality is quite different - quality candidates are finding roles quickly and there's little indication of a future let-up in demand."