Good news on jobs, but there's no room for complacency
The labour market is the part of the economy people can most relate to. When things are going well people are buoyed by job security and, hopefully, strong real wage growth. When the economy has a downturn, it is in the labour market that people feel it the most.
Following the UK's vote to leave the EU, the economy has performed better than many people expected. Real GDP picked up slightly to 0.7% in the final quarter of 2016.
At the same time, the UK labour market has continued to go from strength to strength. The latest data shows 31.85 million people in work. The headline employment rate of 74.6% is the joint highest since this particular measure started being recorded in 1971. And the unemployment rate now stands at 4.7%, considerably below the long-term average of 7.1%. The Northern Ireland data also makes for some encouraging reading. Despite rising slightly over the quarter, the current unemployment rate of 5.7% is lower than the average from 1995 and the employment rate is around three percentage points above its long-term average.
A strong labour market is good news for workers. The headline employment and unemployment rates give some indication of the strength of the labour market, but to gain a clearer picture of the extent of labour market slack it is useful to consider some of the more detailed indicators.
Focusing on the Northern Ireland economy, I have looked at the share of inactive people who want to work, the proportion of part-time workers who couldn't find a full-time job, the share of temporary workers who couldn't find a permanent job and the number of long-term unemployed people as a percentage of total unemployed individuals.
Northern Ireland's high inactivity rate is well documented. For some people, there are reasons why they are not able to work. For example, they may be studying, or caring for family members. But there are some inactive individuals who would like to find a job, and the fact that they cannot get one represents a waste of an economic resource. Focusing on the working age population, ie those between 16 and 64 years old, the latest data shows that around 21% of inactive individuals would like to work, which is above the long-term average for this measure.
Part-time working can also be a sign of slack in the labour market if a significant number of those workers would prefer to be full-time employees. However, many people choose to work part-time. This may be because they have family commitments, or because they are at a stage in their career when they no longer wish to work full-time. So it is important to realise that a high overall share of part-time workers is not necessarily cause for concern. Rather, the focus needs to be on how many of these workers want to be in a full-time job. From October 2015-September 2016, just under 20% of those working part-time couldn't find full-time employment. This is above the average since 2004 (which is as far back as this data series goes) and suggests there is scope for further strengthening in the labour market.
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There are similarities when it comes to temporary workers, in that this may be what some people choose to do. But many of these workers would prefer the certainty that comes with a permanent job. The proportion of temporary workers who couldn't find permanent employment in the year to September 2016 was just under 48%, which is also above the historic average.
When people are unemployed for a long-period of time, it becomes harder for them to re-enter the world of work. Employers often prefer to recruit people who have recently been in a working environment and can provide evidence that they have the skills needed to do the job. In Northern Ireland, people are considered to be "long-term unemployed" if they have been out of work for over a year. The share of unemployed people who fall into this category at present is just over 43%.
However, this is below the long-term average of above 44%, which is encouraging to see.
The current employment and unemployment rates suggest the labour market in Northern Ireland is in a better position now than it was a few years ago. But looking beyond the headline numbers shows that there is no room for complacency.
In next week's Economy Watch, we hear from Neil Gibson of the Ulster University economic policy centre