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BACKGROUND TO LABOUR MARKET STATISTICS: FEBRUARY 1997

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Education and employment secretary Gillian Shephard today welcomed the latest fall in claimant unemployment, down 6...
Education and employment secretary Gillian Shephard today welcomed the latest fall in claimant unemployment, down 67,800 to 1.815 million, 6.5% of the workforce.

Particularly welcome is the fall in the number of people out of work for a year or more, down 124,900 on a year ago.

Mrs Shephard said:

'Britain works. Over the last year employment has risen by 300,000. We have more of our people working and fewer out of work than any other major European country while both France and Germany now have unemployment levels higher than at any time since the 1930's. As prime minister Juppi said recently: 'Everyone is struck with admiration at the British figures on unemployment'.

'In 1993 Jacques Delors, then president of the European Commission, set Europe a target of halving unemployment by the year 2000. Britain is the only major European country on course to meet that target. While employment in the United Kingdom is rising and unemployment falling our French and German partners are still some way behind.

'Of course, that does not mean our partners should or will follow our policies. There is room in Europe for a diversity of approaches. But the evidence is clear that these policies work for Britain.

'For nearly two decades we have steadily and consistently improved the way in which the labour market operates. Old restrictions have been abolished and proposals for new burdens such as the Social Chapter or a National Minimum Wage resisted.

'In Britain the burden of non-wage costs - national insurance contributions, pension costs etc - are relatively low. An employer has to add only£15 for every£100 paid in wages, half the rate in Germany and little more than a third that of France. Yet, because British workers pay less tax and their money buys more, take home pay is very similar - a bit higher than in France and a bit lower than in Germany.

'Britain is drawing in billions of pounds worth of investment and the jobs it creates from around the world. We attract one third of all inward investment into the European Union, more than any other single country and more than France and Germany combined. Our near neighbours are investing in Britain too and Britain is now the number one destination for overseas investment by German businesses.

'The result for Britain is a virtuous circle. Lower costs for employers, more jobs, and take home pay at similar levels to those elsewhere in Europe. That is why Britain works.'

The economy and the labour market continues to show strong improvement.

Output growth rate is increasing and employment is growing strongly. The unemployment figures also show a healthy improvement although the trend is still somewhat confused by special factors associated with the introduction of JSA. Earnings growth remains.

Rate of output and employment growth is improving.

-- rate of output growth has increased over the last year, up 2.6% in year to Q4 1996

-- Budget forecast is for growth of 3 1/2% for 1997

-- employment is up by nearly 300 thousand in the year to the autumn and total hours increased even faster (figures published last month)

-- vacancies notified to Jobcentres are at historically high (but not record) levels.

-- quarterly figures have tended to be volatile but the latest figures show faster growth in both employment and hours than we have seen for about a year.

Claimant count: Jobseeker's Allowance effects

-- fall this month exaggerated by around 3,000 because of delays in dealing with claims.

-- the reduction in the eligibility period for the contributory element of the benefit from 12 to 6 months is likely to have led to a further fall of around 3,000. However, the numbers moving from Incapacity Benefit to JSA are of a similar order of magnitude Claimant count: economic and behavioural effects

-- even after allowing for special factors there is still a very substantial fall in the count

-- part of this appears to be due to more people failing to sign on or withdrawing their claim when faced with the more rigorous labour market tests associated with JSA but there also appears to be with more people going into jobs. This is consistent with the other signs of the pace in the economy picking up.

Earnings growth remain at historically low levels but have risen over last year

-- underlying average earnings growth in December was 4 1/4%

-- this is very low by historical standards. However, it has increased by 1 percentage point over the last year.

-- there are no signs of take-off in pay settlements, rise appears to be due to higher bonuses and overtime, again suggesting that the economy has gathered pace.

-- low retail and producer price inflation.

-- CBI skill shortages at relatively low levels.

-- also, falls in claimant count have been throughout the economy - this month's age and duration figures, for example, show substantial falls amongst long term unemployed.

There are, therefore, few signs of bottlenecks appearing in the labour market.

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