Current trends revealed in our Quarterly Labour Market Bulletin

Quarterly Labour Market Bulletin: Third Edition

In the current climate the economic principles 'full employment' and 'labour market slackness' are much-discussed - yet frequently misunderstood.

So in the third edition of our Quarterly Labour Market Bulletin series we decided to explain these in detail and, within the Jargon Buster section, use definitions, examples and graphs to help explain the concepts.

The Jargon Buster will become a regular feature of the bulletin as part of our commitment to help businesses, stakeholders and other interested readers to use the report as a platform for independent research.

Labour supply continues to struggle to meet job market demand

Each quarter, counter-balancing labour market forces eventually transpire into changes in the employment and unemployment rates. The prevailing direction in the last eight years has been towards a higher-than-average employment rate and lower-than-average unemployment rate.

Data for the first quarter of 2017 reinforces this trend, with the gap between Warwickshire and the UK widening on both fronts.

Labour demand, represented by the level of employment and job vacancies in the market, is strong.

The employment rate in Warwickshire increased from 76% to 77% in the last three months, with North Warwickshire, Nuneaton & Bedworth and Rugby all experiencing a larger-than- average increase.

Job market demand continues to expand. Job postings, corrected for population size, are almost double the national average and are growing at a faster-than- average rate. This reflects our increasingly tight labour market and strong business activity.

Labour supply, represented by the unemployment rate and labour force participation, is struggling to keep up with the increasing demand. The unemployment rate fell from 3.4% to 2.9% - its first fall in two years. The pool of available workers is also falling over time as the rise in the proportion of over 65s rises outweighs the increase in their labour force participation.

The latter amplifies the effects of the former to create an environment in which the number of job seekers per job posting is falling.

With little slack in the labour market and an unemployment rate that is close to its natural level, we should begin to see wages increase in the county. As the pool of available workers becomes smaller, the amount businesses need to pay to attract the right people should rise. For those who are unable to, a skills shortage will become more prominent and re-training or alternative employment options should be considered.