Depending on what statistics you look at, Northern Ireland’s labour market has either taken a turn for the better or a turn for the worse.

Unemployment falling

Falling unemployment remains a key theme of positivity in the local labour market.  The headline unemployment rate hit 4.7% for the period June – August, not far off the corresponding rate for the UK (4.3%) and its lowest level since September – November 2008. Meanwhile NI’s youth unemployment rate has plummeted from 13.2% to 10% over the year to June – August 2017. Furthermore, the local youth unemployment has fallen below the corresponding UK rate (11.7%).

The local claimant count register also paints a picture of falling unemployment and an ‘improving labour market’. September’s claimant count fell by 500 to 29,200.  This represents the nineteenth successive monthly fall and lowest level since August 2008. Furthermore, the claimant count has now fallen by 35,500 since the peak in February 2013.

Cause for concern

All of the above indicators suggest the local economy remains in fine fettle and the labour market is in fact strengthening. Conversely, another batch of labour market statistics suggests that the economy has taken a turn for the worse. While the UK and NI unemployment rates are converging, their respective employment and economic inactivity rates are diverging. Both of these divergent trends are a cause for concern.

Employment falling

Northern Ireland’s employment rate (the % of 16-64 year olds working) hit a record high of 70.0% in June – August 2016.  Since then the rate has fallen in each of the last four consecutive quarters to 68.4% (Jun-Aug 2017). Meanwhile the equivalent UK rate has been on the rise and now stands at 75.1%.  Northern Ireland continues to have the lowest employment rate of all the UK regions.

Economic inactivity on the rise

Economic inactivity (those people neither in work or looking for work) is on the rise.  Indeed the latest three-month period witnessed the largest annual increase in economically inactive since the depths of the recession back in June – August 2009. Northern Ireland’s economic inactivity rate (% of working-age population neither in work or looking for work) hit a record low of 25.8% in June – August 2016 but has subsequently increased to 28.1% – the highest rate of economic inactivity since Q4 2014.

The number of economically inactive people aged 16-64 years has jumped by 10% (or 30,000) since June – August 2016.  Of this 30,000 people increase, one-third of people wanted to work (10,000), one-fifth didn’t want to work due to family and home care issues (6,000) and 1 in 6 didn’t want to work as they are students (5,000). The latter would partly explain the significant fall in the youth unemployment rate as 18-24 year olds move from unemployment to education. Interestingly, the 18-24 year old cohort saw the largest percentage increase (+20%) in inactivity over the last year of any age-group. More concerning was the fact that over 40% (13,000) of the increase in economically inactive (across all age-groups) was due to long-term sickness.

Labour market has turned?

Looking beyond economic inactivity, the Labour Force Survey’s employment figures also suggest that the labour market has turned. Total employment (-1.8%), employees in employment (-1.3%) and self-employment (-3.1%) have all fallen over the last 12 months to June – August 2017. Indeed, total employment peaked in the three month period to August 2016. Looking at employees in employment there is also a divergence between full-time and part-time positions. The latter continue to grow (+1.9% y/y) while the former has fallen by 2.7% y/y in the latest three-month period.

Overall, while some indicators (e.g. unemployment figures) have shown a steady improvement since the EU referendum in June 2016, other statistics (e.g. employment rates and inactivity) suggest that the labour market is in fact weakening and has taken a turn for the worse.

JSA claimants fall

Northern Ireland’s claimant count unemployment figures should not be viewed in isolation.  It is noted that the impressive fall in claimants of the Jobseekers’ Allowance (JSA) has been accompanied by an equally impressive surge in Employment Support Allowance (ESA) claimants. ESA replaces Incapacity Benefit.  It is noted that over the two years to July 2017, the claimant count has fallen by almost 12,700.  Yet the number of people claiming ESA and the old Incapacity Benefit (IB being phased out) has risen by 9,600 over the same period. There are now 131,000 people claiming ESA and the old IB.  This figure is four-and-a-half times the current claimant count.

EU nationals in the labour market

One significant factor behind Northern Ireland’s record highs (e.g. employment rates & private sector jobs) and historic lows (e.g. economic inactivity rates) in recent years has been due to the supply of workers from the EU, so-called ‘EU nationals’. Without this source of labour private sector firms and the NHS would not have been able to expand and deliver public services.

What does or doesn’t happen with this labour supply in the future will impact on our labour market and economic performance. Uncertainty over the post-Brexit landscape is an issue facing EU nationals working in Northern Ireland.  Furthermore, the sharp deterioration in the value of sterling makes working in the UK less attractive (financially) to other parts of the EU. There is some anecdotal evidence that EU nationals have already been leaving Northern Ireland for elsewhere.  This could already explain some of the apparent deterioration in the local labour market.

It is noted that the employment rates for people born outside the UK (76.0%) are significantly higher than for those born in the UK (68.4%).  Conversely, UK born individuals have higher rates of economic inactivity (~28%) than those born outside the UK (19.4%). Therefore if access to EU nationals becomes more restricted in the years ahead we may have to get used to higher rates of economic inactivity and lower employment rates.