UK employment recovery could take up to four years finds research

It will now be more than four years before the UK restores the employment rate of 2008 – and jobs recovery could take far longer. According to a new analysis from independent think tank the Resolution Foundation, it is now all but certain that the current jobs recovery will take longer than that following either the 1980s or 1990s recessions. The new findings are based on calculations of the UK ‘jobs gap’, the number of jobs the UK needs to create in order to restore the 2008 employment rate. The tough figures are explained partly by the UK’s ageing workforce, as a third of the current jobs gap is down to the growing share of the workforce aged over 64, which is growing twice as fast as the population aged 16-64.

In 2008, 60.3 per cent of the UK adult population were in work, a figure that has now fallen to 58.5 per cent. To restore the 2008 rate today, the UK would need to create an extra 930,000 jobs. Far from closing over time, this figure is up from 830,000 in the last quarter of 2012. While jobs continue to be created, the pace of job creation is falling behind population growth. On the basis of population forecasts, employment needs to rise by around 50,000 a quarter just for the employment rate to stand still.

Looking forward, the figures mean that, even under the most optimistic assumptions, a recovery in employment will now need to wait until long into the next parliament. The new analysis reveals that even if the UK were to now repeat the fastest sustainable period of job creation seen in the last 20 years, the jobs boom from 1994 to 1999, the jobs gap will not be closed until mid-2017.  Job creation at this level would be highly surprising: the period from 1994-1999 saw GDP growth average 3.5 per cent a year versus the 2.2 per cent now forecast by the OBR for 2012-2017. These figures take no account of planned public sector jobs cuts.

James Plunkett, Director of Policy at the Resolution Foundation, said: “Full employment was once a guiding aspiration of economic policy but now it risks becoming yesterday’s dream.  Even the much less ambitious hope of restoring the pre-crisis employment rate is starting to wane.

“While unemployment is still surprisingly low given the fall in output seem in recent years, this is just one way of looking at the labour market and it breeds a real risk of complacency. At least as important is the proportion of the population who are working and the poor performance we’ve seen on this measure recently reveals how tough the jobs recovery is going to be.

He adds: “We urgently need a debate about what full employment would look like in the decade ahead given our ageing society and expectations about women working.  Our idea of full employment can’t be based on outdated ideas about working lives and family roles.”