Worcestershire Unemployment, and Earnings, November 2012

The figures and analysis about Worcestershire below are taken from the County Council’s December 2012 County Economic Summary.  This has been revised in format and to some extent content and I have taken what I think are the salient points, having in some places précised them slightly.

Headline Figures

The claimant count in Worcestershire in November 2012 decreased by 203 to 10,114, 552 lower than the number of claimants in November 2011.  This is 2.9% of the 16-64 population, which remains below the regional and national levels. The greatest decrease in absolute terms (between November 2011 and November 2012) took place in Redditch and Worcester with a fall of 205 and 206 claimants respectively.

The urban centre with the highest proportion of claimants aged 16-64 is Kidderminster with 4.2% and the lowest proportion is in Wythall at 1.6%. In Worcestershire's urban areas the proportion of claimants aged 16-64 is 3.3%, which is 0.4% higher than the county as a whole.

After a significant rise (from around 1.5%), the Worcestershire claimant rate reached a peak in April 2009. Since the middle of 2010 the proportion of claimants has stabilised around 3.1%, with some seasonal effects related to Christmas and summer employment.

Long Term Unemployment

The proportion of claimants who have been receiving of Job Seekers Allowance between 6 and 12 months has decreased by 7.7 percentage points to 14.7% since November 2011. It is now the lowest that it has been since December 2010 but the proportion receiving JSA for more than 12 months has increased by 7.9 percentage points over the same period to 22.3% of all claimants.  The number of people claiming for 6-12 months has declined due to them either finding employment or falling into the category of claiming for more than 12 months.

If a person is unemployed for an extended period of time there is an increasing likelihood of them becoming disengaged from the labour market.

Claimants Leaving the Unemployment Count

2,435 people left the claimant count in November 2012, of those people 46.2% have found employment and a further 40.9% are either 'not known' or have 'failed to sign'; it is possible that some of these people have also found employment.

Youth Unemployment – Claimants Aged 18-24

In October 2012 the number of claimants aged 18-24 was 2,875 which is a decrease of 135 compared to October 2012 and 340 fewer compared to November 2011. The proportion of claimants aged 18-24 is 6.9%, the same as the England average but below the West Midlands average (8.7).

The districts with the highest proportion of claimants aged 18-24 were Redditch (7.9%) and Wyre Forest (8.5%), the greatest decrease in absolute terms (between November 2011 and November 2012) took place in Redditch with a fall of 160 claimants.  The figures for individual wards are no longer so easily available but I am happy to find them should anyone want them.

After a significant rise, the Worcestershire 18-24 claimant rate reached a peak in August 2009 though it has since fallen with some seasonal effects related to Christmas and summer employment; however it is yet to reach pre-recession levels.  It is important to reduce the number of 18-24 year olds in unemployment, as it affects people at the very start of their working lives. A period of unemployment at this stage increases the likelihood of an individual becoming disengaged from the labour market and impacting their lifetime earnings potential.

National Picture

For information about the national picture see the BBCreport here.  This shows that Worcestershire broadly follows the national picture, though we are generally in a better position. However, one should never overlook those places that are more significantly impacted and the effect on individuals wherever they are.

The BBC’s Economics Editor, Stephanie Flanders, has an interesting analysis of the national figures here.  One would hope that there has been some pre-Christmas hiring (which may well be temporary) and this may be contributing to improved figures and sentiment.  On the other hand, as Flanders points out, comparing the July to September quarterly unemployment figures with the June to August figures rather than the April to June figures shows the fall in unemployment is much lower and may be reflected in the claimant count figures which tend to be more sensitive.  Not wishing to throw too much cold water on the headline good news, one also notes that the OBR are predicting unemployment to rise to 8.2% before falling at some point in the cycle (as compared with 7.8% now) so a reverse of the trend is on the cards at some point.

Earnings

Flanders also makes the point about lower real earnings and I saw elsewhere attention drawn to a speech on 12 December given by Spencer Dale, Chief Economist at the Bank of England, who notes the “extraordinary flexibility” shown in the labour market. Real wages, measured in terms of consumer prices, have fallen by over 15% compared with the pre-crisis trend. So “no wonder that people are finding life tough”.  Many of us have had below inflation pay-rises, but for those who are underemployed in the current terminology (i.e. are working less or in poorer paid jobs than they would like) are the ones most affected by this trend.  Declining productivity in the economy (i.e. taking more people to produce goods that used to be the case) may be a worry for economists and perhaps for the economy of the country in the long-term if the trend is not reversed, but it has a very direct impact on the individuals affected in the present.  Dale also says:  “The harsh but inescapable reality of these developments – and the real adjustments they necessitate – is that households and families in our economy are worse off. Much worse off.” “The less we produce” and the less “we can purchase using the proceeds from our domestically produced output”, “the less we can ultimately consume”.  It is a matter of judgement whether the trade-off of some or maybe many people taking a cut in earnings is better than the higher unemployment that has been seen in previous recessions.  And the longer the debts, both private and public takes to unwind so that the longer the recession lasts the harder these effects become for the people affected.

Unemployment and the Economic Outlook for Worcestershire for October 2012

The Local Position

Unemployment in Worcestershire dropped slightly last month on the claimant count – by 121 to 10,317.  This was not sufficient to change the percentage unemployed since last month, which still stands at 3.0% on the ONS method of calculation, though it is a 0.2% fall on 12 months ago.  Most of the detail figures are similar to previous months so I don’t propose to repeat them, except to say that, in line with recent national trends, youth unemployment has been falling for a few months and now stands at 14% in the worst affected wards compared with approaching 20% some time back.  This is also having the effect of bringing some areas not previously in the top ten list into the picture.   For more detail on this (see p.22) and other figures go to the County Economic Summary.

Long-term unemployment last month decreased by 1.2 % to 37.6% for those claiming benefits for more than six months and by 0.3% to 22.5% for those claiming over 12 months.  This is against a national trend where the headline rates in this area have increased.  More detail on the national figures can be found here.

National Picture

What I felt to be a helpful analysis of the current national position was offered by Gerwyn Davies, the Chartered Institute of Personnel and Development labour market adviser, who said:

“Employers have continued to focus on keeping labour costs down and a combination of pay restraint and a higher proportion of part-time and temporary work has enabled them to take on more staff.

“Of particular note this month is the disproportionately large increase in part-time employment. Almost half of the employment increase is due to part-time employment, and almost all of this increase is accounted for by women.

“Despite the positive headline figures, the high proportions of part-time and temporary work suggest that many employers remain cautious about adding to their long-term cost base. Business confidence has improved in recent months but is still fragile.

"So while we may see further short-term increases in employment - as indicated in CIPD’s Labour Market Outlook – it may be some time before this translates into the permanent positions that most job-seekers prefer.”

Economic Outlook

I want to use the rest of this piece to focus on the economic outlook.  Mervyn King’s widely reported views about the long and winding road with regard to the national outlook can be found here.  However, I now receive the Hereford and Worcester Chamber of Commerce quarterly economic briefing and so I will try to summarise what that says about business prospects more locally.  You can read the full document here.

Whilst the National trend shows that the economy is 'stagnant' and growth is 'weak', the third quarter of 2012 results locally show 'stability' and more positive results for the manufacturing sector.

Nationally, orders fell but locally there has been a small increase in orders, especially in manufacturing, though service sector orders decreased.  The local domestic sales 'balance' (i.e. those firms reporting an increase in sales compared with those reporting a decrease) is the same as the last quarter, although the increase in domestic sales is slightly lower than last quarter and both manufacturing and service sectors show a drop in sales.

Whilst exports have weakened nationally, the figures are more promising locally, with an increase in export sales for manufacturing although a decrease within the service sector. The overall local ‘balance’ for exports has increased.

Nationally firms are less confident in taking on staff but locally there has been more confidence. There has been an increase in workforce and attempts to recruit with an increase in full-time and permanent positions which is encouraging.

Investment in plant and machinery remains very low in both the service and manufacturing sectors with investment remaining unchanged, however, investment in training has increased, which is encouraging.

Business confidence continues to show 'uncertainty' and is lower than the last quarter with both turnover and profitability lower.  However, there is a slight improvement in businesses operating at full capacity but there is uncertainty within manufacturing with a high percentage operating below full capacity.

Pressure to raise prices has dropped with both manufacturing and service sectors expecting prices to remain unchanged.  Businesses locally are concerned about competition, inflation and corporation tax. Nationally, inflation remains a concern for businesses in both sectors.

Conclusion

Whilst this is very much a summary of what are quite complex figures (essentially firms are asked about a range of figures and their views and expectations and whether they are more confident less confident or feel the same) it would appear that locally across Hereford and Worcestershire that the picture is slightly more encouraging than the national situation.  This would correlate with our better than both national and regional figures for unemployment.  It would also be consistent with our having less ‘old’ manufacturing than other parts of the West Midlands, which is suffering more both long-term and in this recession.  However, whilst Worcestershire is holding its own on figures such as Gross Value Added with Herefordshire and Staffordshire, it is some way behind other shire neighbours such as Gloucestershire and Warwickshire and there are concerns about our ability to keep up.

I have been doing some supporting work for a project called ‘Next Generation Worcestershire’, which raises some serious questions about the need for continuing to increase prosperity and for what purpose.  It will hopefully be published shortly for debate amongst ‘leaders’ in the County.  If it is possible, it would be important for church people/’leaders’ to be able to respond to the questions it raises.

Unemployment in September 2012

Overall Picture

Unemployment fell slightly in Worcestershire last month from 10,637 to 10,468, a drop of 169 claimants, though the change is small enough for the percentage to remain unchanged on the ONS system of calculation at 3.0%.  (On the County Council’s basis, which I have previously used in these briefings the rate has fallen from 3.8 to 3.7%).  Using the ONS figure should hopefully aid more accurate comparison with regional and national figures with the health warning that the more widely quoted regional and national figures are the people available for work, not the claimant count which is used here.

Regional and National Position

This small decrease is consistent with a further modest fall nationally, though according to news broadcasts, the West Midlands region again showed a slight increase in the headline figure but a very small fall in the claimant count (down 1,274 to 163,392 and 6.6%).  There is more information about the national picture here and a further discussion of why unemployment appears to be fallingand the total number of people employed is rising even though we have been in a double dip recession.  It seems to revolve around a number of people working part-time who would rather work full-time, some who are self-employed or contractors who may be classed as full-time but are not actually working that many hours, though the notion of labour-hoarding by employers is now dismissed as they couldn’t afford to keep this up for so long.  Stephanie Flanders, the BBC’s economics editor, also writes about why unemployment hasn’t been ashigh in this recession as in previous ones – because many of us have taken wage cuts and the afore-mentioned reduced hours so the pain has been spread more widely rather than on a smaller number who have lost their jobs.

Local Figures

The total number claiming Job Seeker’s Allowance has fallen by 792 since the same month last year with the largest falls in Redditch (274), Worcester (184) and Malvern Hills (118).  As with last month, the district with the highest claimant count Worcester at 3.7% on the ONS basis and the lowest is Malvern Hills at 2.2%.  As far as urban centres are concerned the highest is again Kidderminster at 5.2% on the County’s slightly different basis that seems to be about 25% higher than the ONS figures, and the lowest is still Wythall at 1.8%.

Young People

The number of young people aged 18-24 claiming JSA fell to 3,090 from 3,130 in August and 3,465 in September last year.  Of the 3,090, 2,640 have been claiming up to one year, which means that 450 (14.7% of the total) have been claiming for more than a year.  Whilst it remains that the ten wards in the County that have the highest 18-24 unemployment are fairly predictably those which appear high up the various deprivation indices it is also the case that some others have recently appeared.  This may be because the level of youth unemployment has been slowly falling so that some of these other places are starting to have percentages similar to those that appear regularly.  It is also true that we are dealing with quite small numbers so any variation can have more marked effect than if the numbers were bigger.  Further information can be found on page 21 of the September County Economic Summary.

Long-term Unemployment

The male rate of unemployment increased rapidly at the beginning of the recession (from just over 2% in 2008 to 5.5% in 2010).  It has since dropped to 4%.  However, the female rate increased more slowly from around 1% in 2008 to 2% in 2010 but has remained more or less constant since then, and is currently just above 2%.  Long-term (overall) unemployment has fallen for those claiming benefit for more than six months by 2% to 38.8% but the figure for those claiming for more than 12 months has increased by 0.2% to 22.8%.

Vacancies

The number of vacancies in the County has gone up to 6,459 in September   from 5,143 in August and 3,737 in the same month last year.  Whether this is yet a trend may be a little early to say, but it may reflect the more positive picture nationally of increasing employment.

This Blog

It is some time since I posted anything on this blog and I’ve written a separate piece to explain why and to invite comments about its usefulness.  I’d be interested to know what you think.

This Blog

I haven’t posted anything on this blog for a while, partly because I have recently taken up a course of further study and that has been taking my energy in getting to grips with what it involves, but largely because after a year of writing and some questioning with colleagues about how best to communicate through social media, etc. I feel it is time for some re-evaluation.

There is the question of whether a blog is the best way to communicate or if some other social media would be better.  I have been encouraged, more than I might have expected from some quarters, that this is worth-while; but whilst some posts get a lot of hits – some predictably because they mention something/somebody well known, some for reasons I can’t quite fathom – others get no more than a handful.  The latter, I think, say something worthwhile, otherwise I wouldn’t bother writing them but it does make one question the use of the time needed.

So, is a blog the best way to communicate?  If it is, there is the question of style and content.  If it continues, I will do my best to make the style more accessible.  One or two people have said they find it difficult to understand.  If that isn’t just about style then what about the content?  I have tried to pitch it as a thoughtful and sometimes challenging comment on current economic and related subjects from a Christian perspective.  It doesn’t aim to be academic because that’s not where I’m coming from and not where I think the audience is but maybe it still assumes a level of understanding of economics or other subjects that not everyone is comfortable with.

I’d be interested in comments, both constructive criticism and well as any encouragement.  The aim is to inform and stimulate thought and perhaps debate across the area of a Christian approach to economic matters, which is what I’m most interested in, but also the wider issues connected with my work with Faith at Work in Worcestershire and now the Committee for Agriculture and Rural Life.  I look forward with interest to any feedback, either through the comment button on the blog site or by email, etc.

UK and Worcestershire Unemployment in August 2012

Unemployment fell in the UK last month on both the broader headline figure and the claimant count.  The West Midlands region bucked the national trend with an increase in unemployment and so did Worcestershire.  The increases are not large but they point to the suspicion in the articles above that some of the national increase is attributable to London and the South East and to an Olympic Games effect.  It remains to be seen what will happen in coming months and how much temporary employment there is in the run-up to Christmas.

There still seems to be a discrepancy between recessionary GDP figures (even if slightly better in the recent revision to - 0.5% instead of - 0.7%) and employment growth.  The numbers of people in employment do seem to include quite high numbers of people working in temporary positions, part-time when they would rather work full-time and people who are self employed but who may not be getting a lot of work.  Nationally, there has been a slight increase in the number of women employed compared with a slight drop for men, but in Worcestershire there has been a slight increase in women’s unemployment (by 0.1%), though there is not enough detail in the figures to be able to say more.

Nationally, there has been an increase in the numbers employed in the private sector and a drop in the public sector, though this is masked to some extent by a recent change of classification of those working in FE from public to private and the speed of drop in numbers in the public sector has been slowing.  However, talking to those working in the public sector, the future depends very much on what the spending settlement for 2013 onwards looks like.

From Worcestershire County Council’s County EconomicSummary, the unadjusted Job Seeker’s Allowance unemployment total for Worcestershire was 10,607 in August 2012, an increase of 62 claimants from the previous month but down 680 (Redditch down 223, Worcester down 202) compared with a year ago. The county rate of 3.8% is unchanged from last month and compares with the West Midlands region (6.6%) and England and Wales (5.4%).  Across the county, the district with the highest unemployment rate is Worcester (4.8%) and the lowest is Malvern Hills, (2.9%).  In terms of urban centres, Kidderminster had the highest unemployment rate at 5.3% and the lowest was in Wythall (1.8%).

The male unemployment rate in Worcestershire is 4.6% (unchanged from last month), compared to the female rate of 2.9% (up by 0.1%).  There has been a small fall in the proportion of claimants claiming benefit for more than six months – 0.1% to 40.8% but those claiming over 12 months have increased by 0.6% to 22.6% between July 2012 and August 2012.  Last month 3,130 people aged 18-24 were claiming JSA benefit compared to 3,085 in July and 3,450 in August last year.  Of the August number 2,685 that had been claiming for up to one year. This is 6.5% of the 18-24 population, and is still higher than the England average.  There is considerable variation across the county, though the ten wards with the highest rates shown in the Economic Summary tend to be in the list most if not every month, but none the less, there does seem to have been a drop in numbers just recently.  Whether this will continue into the new academic year remains to be seen.

The number of notified vacancies in Worcestershire was 5,143 in July 2012. This is 28.4% higher than in July 2012.  This is significantly greater than the change month on month last year, but the figures do change quite significantly month on month so it is difficult to be sure of trends.

Some Thoughts About Harvest

I have just written this (below) that should appear shortly as the 'Thought for the Week' on the Diocese of Worcester website:

We’ve all complained about the weather this summer.  Days out spoilt by rain, holidays perhaps not what we’d hoped, the garden – well!  It’s usually been mow the grass on the one bright day between the rain.

All this has an effect on our farmers too.  In modern farming most crops are normally safely gathered in by now (traditional harvest festivals in October are rather late in the year).  But much of the harvest is about a fortnight late this year because of the wet weather and the lack of warmth and sun.  The weather is still more important than just the effect it has on our holidays.

Hay has grown well where it’s been dry enough to cut (important for animal feed in the winter) but many cereals (wheat, barley, maize) and other crops are badly affected not just by the difficulty of harvesting.  If they are wet they will add to the cost of production by having to be dried and in many cases the quality is not as good as hoped.  Either the grain has not grown as well because of the wet and cooler weather or it may be diseased because of the damp.

This matters to the farmer, because even if the price goes up because of shortage (also affected by the droughts in the US and elsewhere) he may get less for his overall crop if less is harvested and if the quality is poorer he may not be able to sell it at a prime price.  All this means that not just bread, but many other food-stuffs, will be more expensive in the shops.  Whilst this may be an extra expense for us it will be more serious for many poorer people here in the UK but especially around the world.  Higher food prices may mean some people will not have enough to eat and even famine.

These higher prices also affect the cost of animal feed that is necessary to supplement the grass in the fields.  Higher ‘input prices’ might mean farmers costs go up and margins go down.  We have all become aware of this with the direct action taken by farmers over milk prices.  The processors and supermarkets wanted to cut prices they pay for milk from the farmer but at the same time the farmer’s costs (feed, fertiliser, diesel, fuel, etc.) have been going up.  Livestock (and therefore meat) prices have generally risen because as more people in places like China become better off they want to eat meat , raising demand and prices (much New Zealand lamb now goes to China and not the UK), so livestock farmers have been doing better after many difficult years.  However, as costs rise there is less profit and in markets like milk where prices are poor farmers face going out of business or selling herds and scrapping expensive dairy equipment to grow a different crop or animal.

Many of us take the food in the supermarket or on our plate for granted.  The size of supermarkets and the long ‘distance’ between farm and shopping trolley makes the issues to do with food remote.  We are also extremely fortunate because for the most part our harvests and the production of other food are sufficiently reliable for us to barely notice changes from year to year.  Our harvest festivals have become a regular celebration of a bounty that is taken for granted, enabling us to be concerned for the poor and starving in remote places.  Of course, we should remain concerned for the hungry of the world, not least because poor harvest will affect them more than us, but our concern needs to be nearer at home too.  We are all inter-connected with each other, and however urban we may be, with the natural world.  It seems likely that at least some of the weather this year that has affected harvests is due to climate change so all of us who cause greenhouse gasses have a responsibility.

We reflect on our responsibility to care for the creation entrusted to us by God, on issues of justice and of economic power, care for our neighbour and the poor, and our inter-connectedness one with each other and with the creation.

Phillip Jones, Mission Development Officer - Economy

Rural Economic Growth

In my previous post I mentioned that the conference I attended was about rural economic growth.  Having tried to make some sense of the rural economy I will try to pick out the conclusions about where economic growth in rural areas might come from, the barriers and what might help.

The most important point is that rural firms are as likely to want to grow as their urban counterparts, though for various reasons fewer achieve growth.  However, businesses that don’t wish to grow must still innovate: they are a vital part of the total economy and standing still (by implication) can lead to decline.  Because they are a mature industry, land based firms (i.e. agriculture, etc.) could be a stronger force in local development, but not the primary engine for growth – innovation that causes a step-change in output, the primary source of significant growth, will be elsewhere.  This means that nurturing growth within the wider rural economy is key.

Challenges to growth will vary with sector and firm size, so although agriculture as a mature industry has low growth ambitions in the terms of DEFRA’s Rural Economic Growth Review, rural manufacturing is seen as having high growth ambitions, though challenged by inadequate sites and premises.  Although services firms were not specifically mentioned they make up at least a quarter of the rural economy (the push for super-fast broadband will be important to many of them) and will be important for growth.  Small and medium-sized and larger firms face difficulties in recruiting skilled staff and finding space and premises to expand.

There are a number of barriers to growth more generally that need to be overcome including:

·         Improving access to finance

·         Local planning that enables firms and communities to grow

·         Support with recruitment difficulties and skills gaps

·         Improving access to services, markets and networks

·         Better communications infrastructure (a lot of emphasis is being put on superfast broadband in rural areas).

As I mentioned in my previous blog, there are a higher proportion of sole-traders and partnerships and other small businesses in rural areas (referred to in the jargon as micro-businesses) and it is felt these often fall below the radar.  They may find it difficult to grow because of:

·         Limited in-house resources

·         Diverse goals and motivations

·         They may be family-based

·         Many are reluctant or unable to take on staff

·         Many are home-based

It was proposed this suggests the need to review of the needs, opportunities and support for rural micro-enterprises.

DEFRA’s response to the Growth Review, announced in the 2012 Budget, attempted to address some of these difficulties particularly around broadband and access to premises. It also provided a small amount of money for some pilot schemes (which had to be bid for).  These will have a network of physical rural enterprise hubs and act as focal points for other activity including business support e.g. Knowledge transfer, provide mentoring, training and skills and will test different mechanisms and models that can be used by local authorities & LEPs to stimulate sustainable rural economic growth.  The nearest one to Worcestershire is through the Coventry and Warwickshire Local enterprise Partnership and based on a rural technology and innovation centre at Stoneleigh.

 
Other government funding packages will support  rural renewable energy projects, farm, forestry (and horticulture improvement; rural tourism to encourage more visitors and longer stays; expanding the food and drink sector; and the new National Planning Policy Framework that includes a rural exceptions policy - which will encourage the delivery of affordable housing in rural areas, and the broadening of the context of the rural economy with references to the diversification of all rural business (not just agricultural) and a reference to retaining and developing rural services that will encourage and enable rural economic development.

The amounts of money involved in many of these government programmes seem quite small but one of the other features of the rural economy is a mentality of getting on and doing things.  if this can be linked to the government and other encouragemnt that is available this will encourage greater innovation and more opportunities to be taken. 

What do we Mean by Rural?

I went to a conference about rural economic growth some time ago and, whilst I will look at growth later (DEFRA is promoting a Rural Economy Growth Review), this is an attempt to understand the rural economy and its shape based on some of the statistics used at the conference.

There seem to be quite a number of competing voices and some seeming contradictions, but one of the key issues is to define what we are looking at and what we mean by rural.  When we measure the rural economy (or indeed any economy) we need to differentiate between number of enterprises in any sector, number of employees, and Gross value Added (GVA) as these will vary depending on the nature and efficiency of sector of the economy that we are looking at.

The DEFRA Rural Economy Growth Review showed that businesses in rural England make a substantial contribution to the national economy, with a 28.5% share of the enterprises generating around 22% of national employment and 19% of Gross Value Added (GVA), worth around £200bn. At first sight it also appears that the economic structure in rural areas is broadly similar to that in urban areas, though with a higher proportion of sole traders and partnerships, but this takes us to the question of how we define rural.

It seems an official definition is ‘settlements with a population under 10,000 including small market towns, villages, hamlets and isolated dwellings’.  Within this there are three groupings: R80 – local authority areas where at least 80% live in rural settlements, R50 – those where from 50% up to 80% do so and Significantly Rural – those where from 26% up to 50% do so.  There are 55 Rural 80 local authority areas, 48 Rural 50 authority areas and 55 Significantly Rural authority areas.

This can be divided up even further when it comes to analysing the breakdown of industries in different types of area.  Unfortunately it is not possible to cut and paste graphs into blogger/BlogSpot (or at least I haven’t found a way!) but it appears the information at the conference came from a DEFRA publication ‘Statistical Digest of Rural England’ and the graph I am referring to is on page 108.  This shows the percentage of enterprises by industry from less sparse urban through less sparse and sparse rural towns, then villages through to hamlets and isolated dwellings.

The graph shows that in sparse hamlets, more than half the enterprises are in agriculture, forestry and fishing.  These industries also feature highly in less sparse hamlets (25%) and sparse villages (33%) as well as less sparse villages (16%), despite the fact that they only account for 5% of businesses overall in England.  In the remaining four classifications they account for less that 10% of enterprises.  As the number of agricultural enterprises increases the largest group of other enterprises declines in proportion: this is wholesale & retail trade, repair of motor vehicles, which has the greatest number of businesses in England overall and around 25% of businesses in Sparse Urban and Sparse Rural Town and Fringe areas, but in the area of greatest sparsity (where agriculture is is over 50%) this has fallen to 8%.  Other types of enterprises are also compressed as agriculture grows but not so significantly.

What this is saying to me is that it really depends on what you call rural.  If rural means hamlets and isolated houses then farming is very significant in terms of the number of businesses – but even then only accounts for half of them.  If rural includes towns up to 10,000 in population (e.g. in Worcestershire what were classified as market towns under an earlier government initiative such as Pershore and Bewdley, though Evesham is too big) then the situation changes radically.  This was where the representative of the conference from the NFU got upset when a speaker using the definition of population up to 10,000 at the beginning of this blog said that agriculture only accounts for 2% of GVA even in predominently rural areas (in significantly rural areas it is only 1% of GVA).  Of course, as the man from the NFU pointed out when you include in transport and processing as a result of agriculture the proportion will be higher (6.8% of GVA for the Agri-Food sector in 2010 according to a RuSource briefing (no. 1552)) but it really does highlight the question of what you mean by rural.  Here is part of the table from p. 74 of the Defra report to illustrate the point:

Share of predominantly rural areas GVA
Public admin, health, education	23%
Distrib, transport, food, accomm	20%
Production	17%
Business services	10%
Construction	8%
Real estate	8%
Financial and insurance services	5%
Information, communications	4%
Other services	4%
Agriculture, forestry	2%
Total / all sectors	100%

Having mentioned employment earlier, just a few quick points:  As there are few large firms in rural areas this means that many more people will work in small firms or indeed as sole traders and partnerships.  One of the things that came out of the discussion of employment was the resilience of rural people who will often have a variety of small jobs or work for themselves in order to make sometimes a very modest living.  Another feature of rural areas, and this is so for Worcestershire, is the number of people who commute out to higher paid jobs in urban areas.  This means that average income based on residence is higher than average income based on place of employment.

All this shows that the rural economy is complex and multi-layered and that different sectors, particularly agriculture and related industries, will vary in importance according to the type of rural area within that broader definition.  One aspect that is not taken into account in the figures is the importance of agriculture to the landscape.  Even if the number of people employed is now low and the economic numbers perhaps surprisingly small overall, we still rely on farming to shape our landscape and to care for much of the countryside.  The effect of what many of us take for granted is hard to quantify, though there is a cost which comes out of farmers' incomes and is recognised to some extent in the support received from the EU.  Our rural areas are much more than we may at first imagine them to be. 

Unemployment in July 2012 - As Good as it Looks?

Unemployment increased in Worcestershire last month (by 87 to 10,585), which is in line with the trend in the West Midlands region though against the slight fall nationally.

There are a number of ways of expressing unemployment so one has to be very careful to compare like with like.  The headline figures normally quoted in the media are based on ILO (International Labour Organisation) methodology which is a large-scale survey of those available and actively looking for work.  This differs from the other main count, which is Job Seekers Allowance (JSA) claimants (a narrower group, as there will be people who are actively looking for work but who are, for a variety of reasons, ineligible for JSA).  At one time, nationally, these two figures were very similar but over the past couple of decades they have diverged to be around one million apart (ILO 2.56m, claimants 1.59m).

More details on the national figures can be found here.  In the West Midlands region unemployment rose by 7,000 to 235,000 on the ILO count and stands at 8.8%.  This still puts the region above the national level (8.0%) but it is now the fourth worst region in the country, having once been the highest.  A breakdown of regional figures to constituency level can be found here, including a more detailed explanation of the methodology of compiling the unemployment figures.  Despite the West Midlands not being at the top of the table for unemployment as a region it is striking that three of the five worst constituencies are in inner-city Birmingham.  What is also striking is the disparity with other parts of the region, including Worcestershire, where the figures are between 3% and 4%.  What is even more striking is that the figure for Stratford (upon Avon) is 1.3% and that there is a whole swathe of the country to the south east of there that is below 2%.

Of course, just as in Worcestershire, there will be pockets (larger or smaller) where unemployment is higher.  The question is how significant this is against a background where the issue is generally perceived not to be as pressing as it will be in poorer areas.  For it is clear that apart from when large-scale redundancies are made that unemployment affects poorer parts of areas more and that these will often be places where manufacturing or other older industries were prominent.

Turning to Worcestershire, that means our three more urban districts have higher unemployment – Redditch 4.6%, Worcester 4.8%, Wyre Forest 4.6% (Kidderminster 5.3%) – and they were places where manufacturing was, or still is, significant. That is not to deny that many other people suffer unemployment and that there are parts of our rural districts where it is a significant concern.  Figures for Worcestershire can be found in the monthly County Economic Summary prepared by the County Council’s Research and Intelligence section.  Their figures are JSA claimants, and for some reason they use to 2001 census data for calculating percentages, so these are not strictly comparable with ONS data for the region and the rest of the country) that are based on a more recent (2010) estimate of working-age population.

There may be some slight encouragement in the small fall in the long-term unemployed figures, i.e. over six and 12 months (see Figure 5 on p.18 of the County Economic Summary) and similarly for long-term youth unemployment (see pages 25 and 26).  It is difficult to tell if the figures for young people are related to the cycle of the academic year or whether other factors are also important (Figure 7).

There has also been much debate about how unemployment is falling when GDP is falling and we are in the third quarter of a recession.  This was reflected in the differing views of the man from HSBC and deputy regional agent of the Bank of England in my posts of 23 June and 10 July.  Stephanie Flanders (the BBC’s Economics Editor) in her blog weighs the various possibilities.  Unless some of the figures are wrong (and in some cases we are arguing about fractions of a percentage point) it seems there are a lot of people under-employed, either working part-time when they can’t get a full-time job, or who are self-employed doing sessional work but not actually working that much, or that there is quite a lot of labour hoarding going on.  This last possibility is supported by the Chartered Institute of Personnel andDevelopment’s Labour Market Outlook survey, which suggests that many employers are holding onto skilled staff but that if there is no economic improvement soon they will be forced to make redundancies.

On one level, we in Worcestershire might be thankful that we escape the worst of unemployment compared with some other parts of the country.  But neither should we be complacent for there are parts of our county that are more badly affected and questions need to be asked about what is being done about it (including by the churches).  The hugely uncertain economic outlook and a seeming inability to make much impression continues to raise the question about whether the debate and policy options are too much framed by more of the same.   Almost all of our political parties offer only variations of the same orthodoxy.  So far those asking questions about the wider purpose and future of our economic system are on the margins.  Perhaps when there is a crisis but it is not yet cataclysmic there is a tendency to turn inward rather than seeking the new thinking and step-change that may be necessary.  I will express my concern again that the church maybe too much bound up with its own internal crisis and therefore looking inward to contribute to this debate.

Young Bear the Brunt of the Down-turn

There seems to be more evidence that the distribution of work between the young and the rest of the population continues to get more unequal.  I wrote about this in an article called 'Sharing the Work Around' on 14 June, observing how difficult it seemed for many young people to break into decent employment, or any employment at all, and again on 20 July highlighting a report in 'Lessons from Northern Europe for the UK on Youth Unemployment'.  This looked at reasons why Germany and Scandinavian countries have lower levels of youth unemployment as a result of more commitment and better pathways from education to work.

Now I have come across two further (much shorter) reports, like the last one on the Chartered Institute of Personnel and Development website, that shows that more than a fifth of recent graduates are working part-time, working largely in sales and customer services jobs - probably not what they studied for.  It also says that overall only 63% have actually got a job.  Another article reports that staff aged 16-29 faced a 10 per cent wage fall from 2003 to 2011 and that their wages fell significantly in real terms compared to pay for the rest of the workforce, prompting fears for the health of the economy.  Gavin Kelly of the Resolution Foundation that carried out the research said, “Falling demand in key sectors may well have put downward pressure on young people’s wages as well as on employment levels. On top of this, it’s also likely to have eroded opportunities for career progression – with fewer ladders and more snakes – making it harder to get a promotion or an upward move to a new job (which may well affect earnings mobility over the longer term).”

The Church make a substantial investment in young people through the education system; this suggests it needs to continue that concern when they leave education and encounter an increasingly harsh world.

Unemployment Figures for June 2012

Just a brief update on this month’s unemployment figures.  The Worcestershire figures seem more or less in line with the national headline of a slight fall (though the Worcestershire figures are Job Seeker’s Allowance claimants).  There is also a slight fall in youth unemployment in the county but long-term unemployment continues to rise.  You can find the details in the Worcestershire County Economic Summary.  The headlines about the County are on page 4, a graph of long-term unemployment on page 18 and commentary on page 27 as part of a more general section beginning on page 24 that include information about youth unemployment beginning on page 25.

A summary of the national picture can be found here and an interesting analysis by the BBC’s Home Editor of the issues to do with the figures for the number of people actually in employment and the number of full- and part-time workers.  This ties up quite closely with the observations of the deputy agent of the Bank of England in my post a couple of weeks ago on the more general economic situation.  It appears we may be finding there are more people going self-employed, though it’s not clear how much work they may be finding.  

Lessons from Northern Europe for the UK on Youth Unemployment

I wrote a post called Sharing the Work Around (on 14 June) about my concern that many young people find it very difficult to get into any kind of suitable work whilst others are working very hard, either to hang onto a job or because 'effcieincies' mean they are struggling to get the job done.  Then there are a few who seem to take disproportionate rewards for the work they do whilst others struggle to make ends meet.

I came across an article the other day, which, whilst it doesn't attempt to answer these 'big' questions, none the less raises serious concerns about the way we as a country manage the transition for young people between education and work, and why it can take so long for a young person to get to a secure and suitable job.

The research on which it is based arises from a collaboration between the Chartered Institute of Personnel and Development the TUC and IPPR (the Institute for Public Policy Research) and looks at the levels of youth unemployment in this country and compares with other European countries, north and south.  What it finds is that notwithstanding the effects of economic turbulence, there are major difference in countries that invest in high quality vocational education (that is not seen as a poor second to the academic stream) over an extended period and who provide good quality work experience.  There are lessons that can be learned from why Germany and some of the Nordic countries d not have the levels of youth unemployment and insecurity that the UK does.

It points to some reasons why the UK has not been so good at this, but the overall conclusion I draw is that there is a cost in this investment that would be difficult against the current economic backdrop and currently prevailing attitudes, but if we want to reap the benefit of that investment in the future we have got to look seriously at it.  Otherwise, we will go on complaining and, more seriously, we will damage the futures of many of our young people.

The article can be found here.  There is a one page summary at the beginning, but I think the whole article repays attention.

Economic Prospects for the West Midlands

When I last wrote about the talk given by Glynn Jones, the Bank of England’s deputy agent for the West Midlands and Oxfordshire, I said that I would follow this up by writing about the prospects for the West Midlands.  A good deal of this is derived from work done by Dr Jones in his previous job up until 2011 as Head of Economy and Strategy at Advantage West Midlands, the regional development agency until its recent demise due to changing government policy.

Until the present recession the West Midlands region tended to suffer a higher impact on unemployment benefit claims in a down-turn but came back to the national average level of impact more quickly (i.e. we often fell more sharply but then recovered well).  This started to change in the 1990s.  We could say this was due to the decline in manufacturing but the East Midlands, also a manufacturing area, fared better.  Gross Value Added (GVA) growth rates also started to slip away from tracking the national average in the late 1990s – indeed GVA growth per head was the worst of the regions from 2000-2007.

The West Midlands was also the only region in which the private sector contracted in this period with numbers employed made up by the public sector.  A large proportion of the region’s counties and metropolitan/unitary authority areas had below the national average of ‘high value added’ firms with a low proportion of high growth firms – the ones that create the most employment growth.  The region also performed poorly on knowledge-based employment and perhaps surprisingly especially in high value-added firms.  And given its size and importance to the region, Birmingham’s performance  on these measures within the region as a whole has been poor.

We are now seeing some recovery along with improved prospects for manufacturing, especially in exports (though these are now weakening) and particularly in selling into emerging markets.  The position in domestic markets, though, is relatively poorer reflecting the current depressed nature of the UK economy.  There has also been a slight improvement in GVA per head after the long decline noted above, and the differential to the national average on unemployment is beginning to decrease.  There is a large amount of innovation in the automotive sector and its supply chain and this may be having an effect.  However, manufacturing output is still below 2007 levels although the overall decline in production is slightly lower than the headline figures because of the effect on the national figures of the continuing drop in North Sea Oil production.

Productivity generally is weak, though this is predominantly a service sector issue, but it is also true in manufacturing.  When demand rises it may be difficult to meet this efficiently.  There is, though, a debate about how much of this is temporary (due, for example, to hoarding of labour as orders drop off rather than making people redundant) and whether productivity will come back when volumes increase.

We are seeing some repatriation of production to the UK (i.e. manufacturing and other work that was ‘off-shored’ to countries with cheaper labour costs) but this may be over-stated.  It is often in low-volume areas where quality or lead-times are an issue.  Sometimes the production is moved from the Far East, not to the UK, but to Eastern Europe.  That which is moved back to the UK tends to be high value goods that can accommodate higher costs.  Some of this trend is due to increasing labour rates in the Far East but productivity has also risen, and the markets are growing there, so it may still be worth producing close to market.  The service sector is still off-shoring, for example to India.

If there is a growth in production here, whether through repatriation or otherwise, there are concerns about supply-chain capacity (e.g. the factories have gone) and skill issues.  The West Midlands has the highest proportion in England of 16-64 year-olds with no qualifications – and Worcestershire is above the national average for 16-64 year-olds who are economically inactive, though better than the West Midlands region as a whole.

Despite the best efforts of Advantage West Midlands over its lifespan from the late 1990s until year or so ago I observed many plans and strategies, and no doubt the input of many resources, to try to overcome the problems of the region and its relative under-performance.  Alongside this I also saw, and continue to see, the work of many at county and district level in both the public and private sector to wrestle with these issues.  I would not say their efforts were in vain but it seems to me that beyond certain individual triumphs and generally working hard to keep up, it is hard to see real progress even though AWM was regarded as performing pretty well amongst its peers.  Clearly, some of these difficulties are due to structural changes in the economy over many years, if not decades, that are hard to fight against.  But one perhaps wonders if the UK as a whole finds it hard to see the changes occurring around it in the world and is too slow or unwilling to adapt both its business practices but also its attitudes to the skills and attributes needed and the way in which this burden, or more correctly investment, should be shared.  There is a very interesting article, which I will post separately, about some research on the differences in youth unemployment and the ways that countries manage the transition from education to work.

Incidentally, if you want to read the latest report of the Bank of England’s regional agents dated 18 July, you can find it here.          

Is the Man from HSBC Wrong?

If my last blog about the talk by a senior HSBC economist was optimistic then this, which is a report on a meeting addressed by a representative of the Bank of England, is the opposite.  It should, perhaps, be stressed that the views expressed by Dr. Glynn Jones, who is Deputy Agent for the BoE for the West Midlands and Oxfordshire, were his own; though reading the reports of the Bank’s Monetary Policy Commitee meeting on Thursday, when they agreed to add another £50bn of Quantitative Easing, didn’t sound very different.  Bank of England agents are essentially the eyes and ears of the Bank in the regions and visit a wide range of firms to add ‘anecdotal’ evidence about the state of the economy and of sentiment to the statistics that bodies like the MPC use to make their decisions about interest rates and the like.

If one looks at the growth projections for the UK economy in the Bank’s Quarterly Inflation Report they were revised down in May from February.  It is possible to look at the reports online here.  The expectation is that there may well be a further downward revision in the next report in August.  This is notwithstanding a stimulus into the economy of £325bn of Quantitative Easing before the latest announcement last week that equals 20% of GDP.  QE is only supposed to be used in extreme circumstances and yet we are getting used to it.  We live in extraordinary economic times.  The feeling seems to be from a range of commentators (not just Dr. Jones) that growth in the second quarter of 2012 will be negative, giving three quarters of recession.  The extra bank holiday for the Jubilee will not have helped – some firms can make up lost production, some will never be able to; some, surely, will have done better.

Rather than seeing the improvement in unemployment figures as a sign that the growth figures produced by ONS are wrong as Mr Berrisford- Smith from HSBC did, sentiment seems to be moving the other way as seen in this report from the Recruitment and Employment Confederation that says the employment outlook is bleak.

If we were to see some improvement in the economy it should be appearing now as inflation comes down to nearer wage rises (see the comments of Mr Berrisford-Smith in my last blog), export performance should have improved with the fall in Sterling, and we should be seeing signs of firms investing.  Instead the risks to the economy seem to have crystallised to the downside (in the jargon) and even on the more hopeful predictions we will not return GDP to 2007 levels until 2014 – and that doesn’t include what we might have reached if the economy had carried on growing at a trend rate of 2½% a year.

What we have seen instead is that inflation is stickier than expected – this is not due to the domestic economy where there is spare capacity (though some would suggest more of this has been destroyed than is assumed) and wage growth is low.  We have also had the huge monetary (QE) programme and inflation is still not above 5%.  Rather it is due to external drivers such as imported food prices and clothing costs and although there have been some recent drops in oil prices these have been nothing like what one might have expected from previous recessions.  Global GDP is also slowing: there are concerns about the ongoing buoyancy of the US economy as they come to the end of their fiscal stimulus programme with concerns about their budget deficit (the increase in non-farm payrolls recently are barely enough to prevent unemployment rising); the Chinese and Indian economies are slowing (relatively) and they have higher inflation (which we are importing); and the slowdown in the EU has spread from the periphery to the core, which is serious for the UK because such a high proportion of our exports go there.

There are also big question marks over the impact of the continuing EU crisis on the UK.  It affects confidence and therefore the propensity of firms to invest; there is a risk to our financial system from contagion and stress in financial markets, which leads to an increase in the cost of raising funds; and 50% of our exports go to the Euro area, though on the other hand, emerging markets exports are still holding up quite well (keep exporting the Jaguars and Land Rovers to China).

There are three key drivers to the UK economy: consumption, investment (by firms) and government spending.  On the consumer side we have seen a pick-up in mortgage rates whilst the housing market was better in the first quarter than the second due to confidence and the cost of finance.  Consumption represents 60% of demand in the economy and with high inflation (and higher interest rates) consumption has been under pressure – we have seen the growth of the discounters in the high street through the search for value.  As inflation drops the question is will consumers spend or save (or pay off debts)?  The auto-enrolment of pensions (for those not already in a scheme) that is beginning will increase the savings ratio and bear down on consumption.  There are also signs in the housing market of people down-sizing with demand for cheaper properties.

On investment, the question is whether the continuing problems here are due to supply (i.e. banks’ unwillingness to lend) or demand related (the lack of consumer confidence means firms don’t see an expanding market to merit investment).  Opinion seems to be moving towards the latter, which Keynesian economists would favour especially when combined with public sector spending cuts taking demand out of the economy.  There are still a lot of cuts and job losses to feed through in the fiscal austerity programme and this will also have an effect on construction and construction jobs as 28% of construction demand is from the public sector.  Low construction sector spending was one contributor to negative growth in the first quarter of this year.  Normally in a recession it takes nine quarters for investment to recover but companies are still not investing except to meet regulatory requirements and IT changes.  Net lending is negative – i.e. companies are paying off loans and building up cash balances, although there is some bond issuance as an alternative form of cash raising.

As a result of all this, output is flat or even contracting and yet employment is increasing in the private sector, which suggests productivity is deteriorating.  Head-count is deceptive because it is possible to vary hours especially, for example, in retail.  If there is no pick-up in production will this, though, lead to labour shedding with a consequent impact on falling consumption?  Public sector employment is currently falling quite quickly and as has already been said, could fall further in the future. There has been an increase in self-employment, though there is a question about how many of these are productively employed as opposed to trying to go on their own because there are no jobs available.

It is likely that the Bank’s August inflation report will see the growth forecast downgraded again (along with inflation) reflecting the increasingly negative outlook.  The decision last week to inject another £50bn of QE into the economy over the next four months also shows increasing anxiety about the future.  There is concern about the effectiveness of QE – early on it was beneficial but now it is more about confidence and being seen to do something as less of the money seems to escape from the banks and into the economy.  It also punishes savers by driving down particularly longer-term interest rates and pension funds because of the same effect on bonds that they increasingly are buying.  Other liquidity is being injected into the economy through the £80bn finance for lending scheme, which hopefully, will have a more direct impact.  There could also be a view that QE compromises the independence of the central bank and takes the pressure off the government to act – the Bank has been backed into a corner by the government’s fiscal policy.

It is hard on this reading of the present situation and the outlook to feel very optimistic.  Undoubtedly, the level of debt racked up over the past decade or more is still weighing heavily in the background, but many of the policy responses seem to be failing to address the issues adequately.  This appears to be compounded by short-term ‘just enough’ actions, especially in the EU, but elsewhere too, no doubt exacerbated by differences of view on what should be done.  The wider backdrop is the structural change that is taking place in the world economy as economic power moves from the West to the east.

The latest banking crisis and calls in some quarters for an in-depth enquiry into the whole system suggests there is something profoundly rotten about much of our present economic system.  Is it now ‘fit for purpose’ (to use an ugly and over-used term) and what should that purpose be?  I have referred previously to the review by Rowan Williams of both Michael Sandel’s book and a book by Robert and Edward Skidelsky entitled ‘How Much is Enough?  The Love of Money, and the Case for the Good Life’, which uses Aristotelian philosophy to argue for what the ‘good life’ should be and what sort of economy is needed for that.  Should not Christians and the Church also be engaged more actively in this debate?

On a narrower level, Dr. Jones who was previously the Head of Economy and Strategy at Advantage west Midlands, the former regional development agency, also spoke in some depth about the West Midlands economy, its past and its prospects.  I shall look at this in a future blog.