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Mix of factors supporting UK job growth, says CIPD

News | Combination | Factors

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A combination of factors can explain 2012's jobs enigma, where strong private sector employment gains have been seen despite a subdued economy.

This is the argument presented by the Chartered Institute of Personnel and Development (CIPD) in a new report on the UK labour market.

According to the HR body, the strong gain in business employment in the absence of sustained economic growth has been one of "the most mystifying economic features of 2012".

Mark Beatson, chief economist at the CIPD, said many explanations have been floated for this phenomenon.

He suggested that moderation in labour costs as a result of persistent below-inflation growth in pay, 'labour hoarding' which has seen employers holding on to skilled staff more than they have in previous downturns, and growth in the overall supply of labour have all played a part.

"Although the flexibility of the UK labour market is also an important factor, the popular focus on underemployment as a major factor in explaining rising overall employment seems overplayed to us," Mr Beatson claimed.

He noted that official data shows the growth in the number of people employed has been accompanied by an increase of 2.6 per cent in the total number of hours worked.

At the same time, the average number of hours worked by both full-time and part-time workers has also increased.

"While there are undoubtedly significant numbers of people working fewer hours than they would like, and this is an issue that merits further investigation and consideration by policy makers and employers alike, the numbers have not increased significantly this year, making it a poor explanation on its own for the 2012 jobs enigma," Mr Beatson argued.

He said that, on balance, there are likely to be further increases in employment.

"Rising employment alongside muted growth indicates that employers have significant reserves of skilled labour capacity on which to call to support growth," the HR expert said.

"That cannot be sustained forever, so knocks to business confidence could force reductions in capacity that employers have seemed keen to avoid to date."

Equally, the spare capacity in the economy could mean a return to growth but accompanied by slower employment growth than we saw in 2012 as employers draw on the labour reserves they have built up, Mr Beatson added.

"Whatever happens, it seems certain that the squeeze on employees' living standards caused by average earnings going up by less than prices will continue into a fourth consecutive year," he stated.


Posted by Jon Aspinell on 31st December 2012

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