The UK economy faces a challenging brief-term outlook. Uncertainty about the country’s future trading partnership with the EU has triggered enterprise investment development to slow, although a weaker pound has up inflation, diminishing genuine customer spending energy. In our most recent UK Financial Outlook, we lowered our projection for genuine GDP development in 2018 to 1.three%, from 1.five% in March.
Nonetheless, these challenges have but to subdue the vibrant labour marketplace. According to the Workplace for National Statistics, the unemployment price remained at four.two% in March-May well 2018, equalling its lowest level given that the mid-1970s. The participation rate—the proportion of these aged 16-64 in work—hit an all-time higher of 75.7%. But why is the labour marketplace proving so resilient at a time of broader financial anxiousness?
1st, the strength of employment has been driven by ladies. Because the starting of 2012, when employment started a concerted rise, ladies, who represented 47% of the workforce, have accounted for 52% of the enhance in the size of the labour force. This has continued the extended-term convergence in the gender balance of the workforce. The development in female hiring has also been concentrated in complete-time positions, which rose much more than 3 occasions as speedily as element-time roles involving 2012 and mid-2018.
The ONS identifies the escalating state pension age for ladies as 1 element behind increasing female labour participation, but there are probably to be other drivers also. In 2016 the government ended its practice of lifting functioning-age added benefits in line with inflation. This is probably to have nudged ladies towards perform, as ladies account for a greater proportion of advantage claimants than males. Other legislation has also changed. In 2014 workers had been offered the ideal to apply for versatile hours, although in 2015 the launch of shared parental leave created it simpler ladies to return to perform sooner following getting young children. Each shifts may possibly have contributed to greater female employment prices relative to males.
Much more pensioners are remaining in their jobs, also. Right after remaining static at involving four% and six% from the 1970s till the 2008-09 economic crisis, the proportion of these aged 65 and more than in perform has climbed to just about 11%. Our Golden Age index report suggests that the scrapping of the mandatory retirement age in 2011 and higher provision of education had been things contributing to this trend, but also notes that flexibility for ladies, in specific, who may possibly have responsibilities to care for household members, is typically insufficient to allow them to carry on functioning.
Lastly, migration trends have led to an expansion of the UK workforce. In between 2012 and mid-2018 the quantity of EU migrants functioning in the UK rose by just about 900,00. The equivalent rise for non-EU migrants was significantly less than 10% of that figure. EU workers have a regularly greater employment price than each UK nationals and non-EU migrants, which has pulled up the all round price. Nonetheless, the EU workforce has shrunk by about 10% in the previous six months, most probably in response to the Brexit vote and expectations of tighter visa specifications. Must this pattern continue, the optimistic influence of EU migration on the UK employment price will weaken.
Economists have identified numerous prospective threats to the UK’s higher employment price but not all of these are convincing. In specific, we do not anticipate AI and connected types of automation to exert a substantial impact on all round employment levels. Our evaluation suggests that impacts will be modest in the brief run and, even more than the subsequent two decades, job creation from AI will broadly balance out job displacement, albeit with some big sectoral shifts. Likewise, previous knowledge has shown that the economy is capable of absorbing greater minimum wages without having key falls in employment levels. But we will continue to monitor the impact of altering migration patterns, especially amongst EU nationals, and of a weakening domestic economy closely in the coming months to see if the exceptionally sturdy UK jobs development given that 2012 can be maintained.