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Employment up – but is it just an Olympic boost?

Unemployment in London is falling far quicker than anywhere else. Are the Olympics distorting the figures?

Employment is on the rise.

201,000 people have found jobs since last quarter - a 0.4 per cent increase that has led to the highest employment rate since 2009. Furthermore, unemployment has dropped by 0.2 per cent to 8 per cent, meaning that 46,000 fewer people are out of work. Active population has risen by 117,000 to 9.1 million, meaning that 0.3 per cent more people are vying jobs.

A disproportionate amount of this rise in employment has come from London, leading some to believe that we are floating inside a rose-tinted Olympic bubble.

Unemployment is down 1.1 per cent on quarter, compared to the UK average of 0.2 per cent. Similarly, quarterly employment has increased by 1.4 percent, as opposed to the national average of 0.4 per cent. However, temporary employment in the capital has seen a 4.2 per cent yearly decrease; a figure that would seemingly contradict the notion that the buoyancy of the labour market is fleeting. At a national level, temporary workers as a percentage of total employed labour force has remained largely unchanged at 6.3 per cent for the past two years. This may suggest that the April-June 2012 figures are unaffected by the previous (infrastructure) and future (Games-related services) demand for temporary work. While the short-term employment impact of the Olympics is undeniable, truly illustrative figures are yet to come.

Indeed, London is doing well relative to the rest of the country (particularly when compared to Yorkshire and the Humbert, East Midlands, and West Midlands, where unemployment actually increased this quarter), but so is the North East, for instance, noting a quarterly decline of 0.9 per cent in unemployment.

Nonetheless, there is reason to consider the figures with guarded optimism. As recent trends have shown, the increase in employment defies economic logic when GDP barely limps forward. As quoted by the Financial Times:

"The implication is that either the economy is doing appreciably better than the national accounts data show, the labour market is doing significantly worse than the hard data show, or productivity has genuinely weakened sharply," said Howard Archer, an economist at IHS Global Insight. "The jury is currently very much out as to what the actual answer is but it could very well be a combination of all three."

As noted in previous analyses of labour data, productivity seems to have slumped in the wake of declining capital investment. This troubling scenario is compounded by underemployment. Part-time employment has risen 1.9 per cent this year (0.7 per cent this quarter). But more worryingly, the percentage of people who have forcibly undertaken part-time work for lack of a better option has increased by 12.6 per cent since last year (1.1 per cent quarter-on-quarter).

Moreover, of the 201,000 newly employed, 12,000 are unpaid family workers, representing a 12.4 per cent quarterly increase and 17.7 per cent year-on-year. In a similar vein, self-employment has increased by 0.9 per cent this quarter, and government supported training and employment by 17.7. These numbers suggest that that the 0.4 per cent increase in employment is more hollow than hoped. There are 0.1 per cent fewer employees compared to last year, insinuating that employement has been artificially increased by government programmes and that people have been forced into entrepreneurship.

Photo: Getty Images
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How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.