By Marcus Leach
News that UK unemployment has fallen to 2.53 million as the number of people out of work fell by 50,000 in the three months to August, has been welcomed in certain quarters of the business world.
David Kern, Chief Economist at the British Chambers of Commerce (BCC), said the figures are positive and confirm the BCC's view that the economy is returning to positive growth.
“The latest job market figures are encouraging and support our assessment that the UK economy has returned to positive growth in the third quarter of 2012," he said.
"The level of employment is at a record high, and the fall in the level of inactivity is a positive development, signaling that people are returning to the workforce. The strong trend in the labour market raises questions about the accuracy of GDP figures which are still showing three consecutive declines over the period to the second quarter of 2012.
“Despite the positive job figures there are still some areas of concern, particularly the further increases in the number of people that have been unemployed for more than a year, and for more than two years. The overall economic situation remains difficult. There is little doubt that the economy has been stagnant for too long, and forceful measures are needed to ensure that we return to sustainable positive growth.
“Efforts to reduce the deficit will mean that employment in the public sector will continue to shrink. So it is critical to ensure that the private sector is strong and thriving and remains able to create new jobs. The government must build on the positive job figures, with measures to help businesses grow and create jobs.
"An effective growth strategy should include further deregulation, increased infrastructure spending, and rapid implementation of the decision to create a business bank. If the trend in employment is reversed, the government should not hesitate to reduce employer National Insurance contributions to improve businesses’ ability to take on staff.”
Bernard Brown, Partner and Head of Business Services at KPMG, said that it is a positive sign to see unemployment down overall. Although he did remind us that youth unemployment still remains a problem.
"It's good news that unemployment is down overall, but the question remains about what will happen to the younger generation," he said.
"Right now the economic situation makes it easy to argue that organisations need experience to pull them through, but this is a short-sighted view. Even with the figures showing that the number of unemployed 16-24 year olds has fallen by 62,000, there are still too many young unemployed people, with plenty to offer employers.
"Today's workforce will not be around forever and unless businesses across the country put plans and people in place to share expertise and experience, they will find themselves bereft of the skills which can make them competitive. It's well known that organisations benefit from a blend of youth and experience. Employers will do well to remember this or risk an uncertain future for individuals and organisations, alike."
However, Gerwyn Davies, Labour Market Adviser at the Chartered Institute of Personnel and Development (CIPD), said that the figures should be viewed with a little more caution.
Davies says that much of the increase in employment numbers is down to temporary appointments, and warns that the number of long-term unemployed is the biggest problem facing the government.
“A quarterly rise of more than 150,000 employees offers the strongest evidence for some time that the jobs market might be gathering genuine momentum, with growth now being driven by firms rather than the self-employed," Davies said.
"Almost every economic indicator is tentatively improving; with redundancies falling, vacancies rising and increases in basic pay edging to a level close to the current rate of inflation. However, with around a third of this increase in employment being taken up with temporary work, the figures also highlight the uncertainty still felt by many employers.
“Also interesting to note is the reversal of the recent trend in the proportion of migrant and UK born workers filling vacancies. Recent quarters had seen UK-born workers fare less well in relation to non-UK born workers. However, three quarters of the employment increase is now being taken up by UK-born workers, which suggests that the government’s jobs search requirements are working.
“The only cloud on the government’s horizon is the growing tail of long-term unemployed. All eyes will now therefore be on Work Programme providers’ task of bridging the gap between the demands of employers and the employability skills of the long-term unemployed."
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