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The UK labour market has weathered the storms thrown at it surprisingly well. This week we take a look at one aspect of its flexibility in particular – the vital role being played by self-employment – and ask, is this a golden age for entrepreneurs?
UK unemployment unchanged as the self-employed prop up the labour market. Unemployment was stable at 7.8% in the three months to April, with just over 2.5 million people out of work. But the self-employment boom continues. There are now 4.2 million people working for themselves, meaning that almost one in seven workers is their own boss. Doubts have been expressed as to whether this reflects genuine entrepreneurial activity, or is actually a result of jobseekers filling in their time with whatever work they can get. In the wake of the 1990s recession self-employment rose to a similar proportion of the workforce as now, showing that a weak job market is clearly an important factor. But relatively few of those self-employed positions disappeared once that recovery got going, suggesting that the entrepreneurial bug might be hard to kick even when a more secure job is available. Either way, without the current self-employment boom unemployment would now be pushing 9%. That’s a good enough reason to give our current crop of first time entrepreneurs a round of applause.
Private job creation still outweighing public sector cuts. There were 112k fewer public sector jobs over the 12 months to March 2013. That brings the running total of public sector losses to 463k since September 2009. But the private sector continues to more than compensate for this adding 544k jobs over the last year. Since 2009 the private sector has created almost three jobs for every public sector loss. But long-term unemployment continues to be an ever increasing blight. There are 898k people who have been out of work for more than 12 months and who are still looking for a job. We have to go back to early 1996 to find the last time this number was higher.
Average pay up slightly, but new research shows how age matters. Whole economy total pay grew by 1.3%y/y in the three months to April, the first time that the growth rate has increased since September 2012. Only the manufacturing sector saw earnings growth outpace inflation, while the beleaguered construction sector saw average pay fall -0.8%y/y, the seventh successive monthly decline. But new data showed how the performance of income has been dependent on your age. Since 2007 the only age group not to see a real fall in median income has been those over the age of 60. Meanwhile average incomes for households of adults in their 20s fell by 12%.
Eurozone industrial production beats expectations in April. Industrial production was up 0.4%m/m from March. The better-than-expected result was boosted by a strong 2.7% increase in the production of capital goods (e.g. machinery), and a more modest 0.7% rise in non-durable consumer goods. But energy production shrank by 1.5% on the month and durable consumer goods dropped by 2.7%m/m. Industrial output continued to decline in peripheral economies such as Spain, Italy, Portugal and Greece, while the situation in the so called core economies was a bit more varied. Output returned to growth, by 2.3%m/m, in France and continued to expand in Germany, but dropped by 4.3% in The Netherlands. Whilst far from stellar, this performance might just be enough to drag the Eurozone out of recession in Q2.
Is grumbling about red tape another sign of US recovery? The National Federation of Independent Business reported its small business optimism index rose again in May to hit its highest level in a year. Firms say the biggest problems they face are taxes and government red tape. Not too long ago it was the level of demand, which has slipped to third place. Perhaps worrying about things other than the flow of business is another sign of recovery. Consumers are feeling upbeat as well. Confidence eased down from last month’s six month high, but at 82.7 it’s still pretty good. Retail sales advanced 0.6%m/m, consistent with a continuing steady but modest contribution to growth by consumers. There was more evidence, too, of strengthening in commercial property where values are up by around 7%y/y with distressed sales at their lowest level since 2008 according to CoStar, a real estate information company. The week was rounded off by the IMF declaring that the US recovery would be even stronger if government spending cuts weren’t so severe. Unfortunately pronouncements from the IMF are unlikely to break the budget deadlock