The latest Scottish and UK regional labour market data published by ONS today reveal a continuing and now strong recovery in the Scottish labour market. Over 29,000 jobs were created in the quarter Oct-Dec 2013 to Jan-Mar 2014 and more than 67,000 jobs created over the year. Unemployment fell by 18,000 in the quarter to just below 178,000 and the unemployment rate fell from 7.1% to 6.4%.
The Scottish Government and UK Government’s both moved quickly to claim the recovery as being the result of their policies. The First Minister Alex Salmond is reported by the BBC as saying:
"Today's employment figures …… demonstrate the Scottish government's policy of investing in infrastructure to boost the economy is making significant progress, with employment levels at a record high………
Scotland continues to outperform the UK across employment, unemployment and inactivity rates, which shows that even with the limited powers over the economy at our disposal we are improving our country's economic health."
Unfortunately, this is a significant distortion of the true picture. While employment, unemployment, and inactivity rates may be higher, lower, and lower respectively than in the UK as a whole this ignores both the comparative performance of the Scottish labour market over the period of recession and recovery and its starting point.
Take employment. The first chart shows employment in Scotland and UK in recession and recovery.
It is worth noting first, one piece of good news apparently missed by the politicians: the number of jobs in Scotland reached and passed their pre-recession peak in the current quarter, almost seven years ago. Let me repeat that: almost seven years ago. Given that there has been no growth in net jobs in Scotland for seven years, the trumpeting in the media that employment in the current quarter reached its highest level since records began in 1992 is a massive non sequitur.
Moreover, far from the Scottish labour market outperforming the UK during recession and recovery, the facts show the exact opposite. Employment contracted by -4.7% in Scotland in the recession but fell by only -2.5% in the UK. Jobs in Scotland reached their pre-recession peak in January – March of this year but in the UK the peak was attained in July – September 2012, eighteen months earlier. And currently, UK jobs are more than 3% above the pre-recession peak, while the figure is just over 1% in Scotland.
Even the unemployment situation in Scotland flatters to deceive. The chart below makes this clear.
Yes, Scotland’s unemployment rate is, at 6.4%, below the UK’s 6.8%. But when the recession started the Scottish rate, at 4.2% was more than one percentage point below the UK’s rate of 5.4%. Unemployment rose more quickly in Scotland than in the UK and for some of the recession remained above the UK reaching a higher peak of 8.6% compared to 8.4% in the UK. It is great news that we are now experiencing a sustained fall in unemployment in both Scotland and the UK. But with unemployment some 2.2 percentage points above its pre-recession starting point while the UK is only 1.4 percentage points above its pre-recession starting point, there is little here for the Scottish Government to crow about.
It is also quite ludicrous for the Secretary of State for Scotland, Alistair Carmichael to assert that
“We will do everything we can to create the conditions needed to support their growth, creating more sustainable jobs especially for our young people and long term unemployed."
It is ludicrous because the UK Coalition Government’s fiscal consolidation policy has effectively delayed the recovery by 3 to 4 years and when jobs did begin to be created they began to be created in large numbers because of the collapse in productivity, with the UK economy only just returning to its pre-recession peak in GDP terms. Moreover, as the Scottish Government’s recent youth employment briefing document shows youth unemployment stood at 18.8% in Scotland, in Dec – Feb 2014, higher than in the UK at 18.4% and rising over the year while the absolute number and rate fell in the UK.
We are experiencing a recovery that is getting stronger. There is a good chance that it will be sustained. Not everything is rosy though. The spectre of deflation haunts the Eurozone and we may not be immune from its effects. Growth in in China and perhaps even the US may be faltering. Meanwhile domestic households in Scotland and the UK remain burdened with historically high levels of debt, which could limit and constrain the growth of consumer demand. Investment is recovering but remains weak and there is very little positive news on the export front.
And in the labour market in Scotland there is still plenty of slack as the next charts shows.
By all means Scottish politicians should welcome the recovery but spare us the hubris please.