Following the release yesterday (18 February) of the latest labour market statistics the Deputy First Minister and Cabinet Secretary for Finance, John Swinney, is reported as claiming that:
"Scotland is outperforming the UK on all three headline labour market indicators with employment continuing to increase and unemployment down …."
While this is true if you simply focus on recent levels and changes in employment and unemployment, it is not true for the Scottish labour market if one takes the period from the Great Recession in 2008 and subsequent recovery.
The latest labour market data published on Wednesday provide information up to the end of last year: October – December to be specific.
Chart 1 shows that by Oct-Dec Scottish jobs as reported in the LFS household surveys were 2.4% above the pre-recession peak, but UK jobs were 4.0% higher than the peak. So, despite the good recent performance of the labour market in Scotland overall jobs performance in the recovery continues to be worse than the UK and as noted below, there appears to be more 'slack' in the labour market in Scotland compared with the UK.
An indication that there is still a deficiency of demand in the Scottish labour market in relation to the situation before the recession is provided by data on the number of weekly hours worked. Chart 2 graphs this statistic from 2007 for the total weekly hours worked compared to the pre-recession peak for Scotland and the UK.
By the period October 2013 – September 2014, the number of total weekly hours worked in Scotland was still -1.0% below the pre-recession peak. So despite the number of jobs being higher than before the recession, the demand for labour as measured by hours worked is still lower.
Finally, not only is the demand for labour in Scotland still lower than pre-recession but demand - measured in terms of jobs - is still considerably deficient when compared to the supply of labour. Chart 3 shows the employment to population (aged 16 and over) ratio relative to pre-recession peak for Scotland and the UK to October - December 2014.
By October - December 2014, the ratio stood at -2.1% below the pre-recession peak, compared to -6.7% at the trough of the recession. In the UK as a whole, in contrast, the ratio is only +0.7% above its pre-recession peak.
All of this suggests that while the jobs market has recovered substantially, the recovery has been weaker in Scotland both in relation to the situation before the recession and in relation to the growth of labour supply. In the UK, in contrast, a strong jobs recovery is evident compared to the situation before the recession and the recovery has just managed to keep pace with the growth of the labour supply. We might venture to suggest from the data in Chart 3 that sustained pressures on wages to rise should be starting to occur in the UK, but not so in Scotland.
This conclusion is also echoed in the unemployment rate data as shown in Chart 4.
While the unemployment rate is currently lower in Scotland, at 5.4% compared to 5.7% in the UK, the UK rate is approaching its pre-recession rate of 5.4%, whereas there is still some 1.2% points to go before that situation is reached in Scotland.
So, let us cheer the good news that jobs are being created and unemployment is falling but let us not fall into the trap of ignoring the particular problems of rapid job loss, unemployment increase and a recovery biased towards part-time, adult employment that befell the Scottish labour market over the earlier period of recession and recovery.
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