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UK witnessed its first-ever "Growthless Jobs Boom" in 2012, in which more than 600,000 jobs - highest annual addition since late 1980s - were added, while the economy grew only 0.3%. Nevertheless, other major labour market indicators - such as productivity, wages, full-time/part-time employment, long-term unemployed etc - which are relevant for the future growth prospects fail to show such an impressive performance. Consequently, it seems difficult that UK labour market would be able to repeat the 2012 performance and UK's unemployment rate is expected to fall only gradually.
A major share of employment gains happened in the part-time jobs - which are up by ~7.5% from its pre-crisis level, while full-time jobs are still lower than their early 2008 levels
Besides, although active population rate has not changed much in the UK during the crisis, the participation rate for youth population (aged 16-24 years) has declined to its lowest level at least since 1992, which is likely to have adverse impacts by delaying their ability to gain on-the-job training and experience
Although the jobs boom helped the unemployment rate to fall from 8.4% in 2011 to 7.8% last year, we expect it to stay at 7.8% till the end of this year. Besides, our unemployment model shows that in case the nation adds 300,000 jobs per annum (or 25,000 jobs per month) for the next four years till 2017, UK unemployment rate could fall to 7.0% in mid-2017 (Please note that the economy increased its employment by an annual average of 266,000 between 2003 and 2007). It points to a rate movement by the Bank of England (BoE) only in late 2017 or in 2018
Please refer to the attached document for details.
Regards,
ICICI Bank : Treasury Research Contact:
Nikhil Gupta:
(+91-22) 2653-1414 (ext 2180)
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