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Promoting social inclusion in the labour market
25
Jul
Has construction really contracted by as much as the ONS thinks it has? Updated version July 2012
The shock fall in GDP figures announced today has largely been attributed by the Office for National Statistics to a 5.2% fall in construction output. However, trends in recruitment from the latest labour market data simply do not seem to back this up. So what is going on?
As I’ve argued before, labour market data can provide a timely and accurate proxy for what is happening in the wider economy. In May, after the last GDP figures, I showed that the 'surprise' fall in construction had actually been evident in the labour market data. By comparing construction vacancies with construction jobseekers, there is a clear slowdown from the turn of the year.
However, looking at the most recent data shows that the construction labour market actually started to recover in the second quarter of this year.
The figures we look at are the figures by occupation group. Our figures go through to 8 June 2012. They also include self-employment, which is a major feature in construction. We analyse three groups of occupations – skilled trades, operatives and labourers. Our time series are based on the balance between new vacancies reported and new Jobseeker’s Allowance claims for people whose usual occupation was in these groups. We think this gives a good indication of what’s happening in the sector – as the ratio goes down if vacancies fall, or more people sign on who would usually work in construction, or both.
While Jobcentre Plus vacancies are far from a complete record of vacancies in construction – much job-filling still goes on by informal recruitment (knowing people and hearing about possibilities in pubs) it is likely that Jobcentre Plus vacancies represent a relatively large (and constant) share of vacancies in construction.
The figures discussed here are national – trends will differ in different localities – and they form one small part of the statistics package that we offer to the welfare to work sector (right down to local authority level, across all the main occupation groups).
What do the figures show?
Chart 1 shows the trends for skilled trades. This updates the data from my May blog, but following the downturn in early 2012 the figures have stabilised and slightly improved. Although there are still fewer vacancies than jobseekers, new vacancies represent 91% of new Jobseeker's Allowance claims on the most recent data.
Chart 1: Skilled Construction and Building Trades
Chart 2 shows the pattern for labourers. While the broad pattern is the same, following the slowdown in early 2012 the ratio has actually bounced back more strongly in the second quarter – to a point where there are now more new vacancies than new Jobseeker's Allowance claims.
Chart 2: Elementary Construction
Lastly, Chart 3 shows the pattern for operative builders. Here the recovery since early 2012 has been even stronger still.
Chart 3: Construction Operatives
So what is going on? It’s possible that both the labour market data and the GDP data are both right – for example the sector could have unmet recruitment needs and still be contracting if the labour market isn’t responding quickly enough to demand for labour. But this doesn’t seem likely in the current market. Alternatively it could be that there are fewer jobseekers with a usual occupation in construction, which is pushing the ratios up – but the absolute numbers of claimants and vacancies don’t back this up either.
Another, plausible, explanation is that the ONS figure is wrong – and that GDP therefore did not contract by as much as is first estimated.
09
Jul
DWP announcement on Work Programme off-benefit progress
The Department for Work and Pensions (DWP) has published analysis of early entrants to the Work Programme. Our assessment of this data is below. The key points from our assessment are:
- It is too early to tell whether the programme is performing above or below the minimum performance levels' set in Work Programme contracts.
- For this first month of programme entrants, the Work Programme appears to be performing broadly in line with the Flexible New Deal programme that it replaced.
The DWP analysis relates to the first 28,600 participants in the Work Programme - June 2011 starters.
Breakdown of June 2011 starters:
JSA 18 to 24 JSA 25 and over JSA early entrants Others
15% 59% 24% 3%
At this stage, the early entrants included large numbers who had come off previous programmes, and therefore had some previous support.
DWP estimates that 48% of these had a break in benefit up to the beginning of March 2012.
This is broadly consistent with our estimates drawn from Jobseeker's Allowance flow data, given the balance of Work Programme starters.
The data DWP presents roughly cover the same time interval as the ERSA figures for job entries - which estimated that 27% of June starters had achieved a job entry (to March 2012).
The difference between DWP's 48% and ERSA's 27% will include job starts that providers are not informed about (and so cannot claim) as well as leaving benefits for other reasons (including sanctions). Previous evidence from the old new deals and recently from the Northern Ireland Steps to Work programme shows that additional jobs exist and will be identified from HM Revenue and Customs evidence of tax payments.
To March, the starters analysed were 35% of the way through their service period. Analysis must therefore take into account that more job outcomes could be achieved in the remaining 65% of the period.
DWP provides evidence on 13 and 26 week gaps in benefit claim (including unfinished gaps). These are not known to be jobs, but may be more likely to be jobs than gaps in claiming for other reasons.
This shows that nearly one in four (24%) had a 13 week gap in benefits up to March, and 14% had already recorded a six-month gap in benefits.
DWP provides a short analysis of the 14% of starters who were off benefit 10 weeks after joining the Work Programme and went on to remain off for 13 and 26 consecutive weeks.
Of this 14% of starters, 60% had experienced a 26-week (or more) gap in benefit - if they were working, these jobs would count as 'job outcomes' under the Work Programme. In addition, job outcomes can be accumulated over several jobs. Seventy-one per cent of the 14% off benefit at 10 weeks had a 13-week break in benefit.
As these figures relate only to the June 2011 starters, we cannot calculate a valid percentage to compare with the minimum performance level of 5.5% for the first year yet.
How does the Work Programme compare with previous programmes?
The information presented is not in the same form as that presented for previous programmes, which makes comparisons hard.
Comparing the results presented with the Flexible New Deal, 19% of FND participants were recorded as achieving a three-month job by nine months after the start (source: Parliamentary written answer by Chris Grayling: HC Debates, 20 January 2012, c1023W).
If the 24% of June 2011 Work Programme starters who had three-month breaks in benefit claims were in work, then the Work Programme was achieving at a higher level than Flexible New Deal. However, the new figures are off-benefit and include other reasons for being off benefit. This would imply that the Work Programme is operating at, or around, FND performance.
The Work Programme period covered has had only one quarter of economic growth, while the FND period from Q4 of 2009 through to Q1 of 2011 (six quarters) had five quarters of growth.
Therefore, the Work Programme was operating in a worse economic environment than FND.
Paul Bivand
9 July 2012
PS: DWP has also published Ad hoc statistics on the volumes of young people entering employment from the Work Programme since the start of the Youth Contract.
09
May
What do Jobcentre Plus vacancies tell us about the trends in construction?
The recent GDP figures included a ‘surprise’ fall in construction – the surprise being that just a few weeks before, the main private sector survey had estimated that construction was expanding faster than at any point for two years.
So who’s right?
This post is the third in a series looking at what Jobcentre Plus vacancies can tell us about trends in the economy (previous posts are here and here). And I will argue that by looking at Jobcentre Plus vacancies we can see a clear slow-down in the construction sector in the first part of this year. The figures discussed here are national – trends will differ in different localities – and they form one small part of the statistics package that we offer to the welfare to work sector (right down to local authority level, across all the main occupation groups).
While Jobcentre Plus vacancies are far from a complete record of vacancies in construction – much job-filling still goes on by informal recruitment (knowing people and hearing about possibilities in pubs) it is likely that Jobcentre Plus vacancies represent a relatively large (and constant) share of vacancies in construction.
The figures we look at are the figures by occupation group. Our figures go through to March 2012. They also include self-employment, which is a major feature in construction. We analyse three groups of occupations – skilled trades, operatives and labourers. Our time series are based on the balance between new vacancies reported and new Jobseeker’s Allowance claims for people whose usual occupation was in these groups. We call this the ‘dynamic ratio’ and we think it gives a good indication of what’s happening in the sector – as the ratio goes down if vacancies fall, or more people sign on who would usually work in construction, or both.
What do the figures show?
Chart 1 shows the trends for skilled trades. In the recession, the ratio fell from nearly two vacancies for every new person claiming, with a usual occupation in skilled trades, right down to 0.25 vacancies per person (or to put it the other way, four new claimants for each new vacancy). This then recovered to around 0.8 vacancies per new claimant between the end of 2010 and early summer 2011, followed by a major improvement in autumn 2011, to above the balance point of new vacancies equalling new claims (which would be consistent with unemployment falling).
However since the turn of the year, there has been a definite downturn, back into negative territory.
Chart 1: Dynamic ratio: Skilled Construction and Building Trades
Chart 2 shows the pattern for labourers. This is very much the same pattern as for skilled trades, with some small differences. The pre-recession picture was not as good, which may reflect labouring jobs drying up quicker than skilled jobs as the recession took hold. But the recovery in the later part of 2011 was a bit better.
Again, the ratio has fallen back since the turn of the year.
Chart 2: Dynamic ratio: Elementary Construction
Chart 3 shows the pattern for operative builders. The overall pattern is very similar, though it appears the improvement up to autumn 2011 was somewhat better than the other groups (but I suspect that this may be owing to classification issues: the grouping of new claimants between skilled trades and operatives in the past may differ a bit from the grouping in the new vacancies figures).
Chart 3: Dynamic ratio: Construction Operatives
Nonetheless, the trends are still recognisably similar to other trends – again with a sharp fall since the turn of the year.
24
Jan
NAO predicts rocky times for Work Programme
The National Audit Office (NAO) has predicted in its report the Introduction of the Work Programme (24 January 2012) that job outcomes for Jobseeker’s Allowance over-25 claimants will be 26% rather than DWP’s assumption of 40%.
NAO has based this on Flexible New Deal performance and uprated it to take account of Work Programme features. Inclusion has said before that we do not think this is a sufficiently robust way of predicting Work Programme performance.
However, the wider economy and the state of the labour market will have some impact on performance and the finances of prime contractors. What is too early to say is the scale of the impact and prime providers’ ability to cope with both increased volumes and reduced job outcomes.
Lower economic growth means fewer jobs in the economy, which means more people not in work, more people going onto government programmes, and programmes having a tougher challenge in getting people back into work.
Our analysis shows there is a strong historical relationship between changes in overall job entries for claimants and changes in GDP. However, an objective of the Work Programme is to break this historical link and increase the number of long-term unemployed people getting jobs in a highly competitive jobs market.
Back in spring 2011, when the Department for Work and Pensions (DWP) signed its contracts for the Work Programme, prospects for growth were a lot better than they are now. DWP included in those contracts minimum performance levels and indicative volumes that were based both on the forecasts of growth at the time, and the historic performance of programmes.
The Office for Budget Responsibility’s (OBR’s) November 2011 forecast estimates that there’ll be 400,000 fewer jobs over the period from 2013 to 2015 than they had predicted in their November 2010 forecast.
The OBR’s forecasts for claimant unemployment are up to 440,000 higher than its November 2010 forecast.
So what does this mean for the Work Programme?
Higher claimant count numbers lead to expected rises in Work Programme referrals – at least in the Jobseeker’s Allowance groups – which will lead to higher payments to primes for ‘attachments’ (the payment made when individuals start the Work Programme).
It could also lead to fewer job outcome and sustainment payments. We estimate that there could be 90,000 fewer Work Programme job entries over five years than would have been expected based on the OBR November 2010 forecast.
Inclusion’s analysis has shown that a 1% annual change in GDP results in a change in job entry rates of just under 10%. So for a programme with a 40% job entry rate, a 1% reduction in GDP reduces the job entry rate to 36%. Independent forecasts for growth by the end of 2012 have dropped 1.7 percentage points in a year, so if the 1:10 relationship held, a 40% job entry rate estimated at bidding time would fall to 33%.
These estimates come from our analysis of the relationship between Jobcentre Plus’s published job outcomes 2006-10 and economic growth (GDP).
Equally troubling for providers is that the forecast for economic recovery is pushed back – with the return to trend growth now not coming until 2014. So, if the forecasts are right, primes would have to support more participants, for longer, before job outcome payments come in.
So the challenge is set – primes will have to demonstrate that they can break the link with past performance and there is some way to go yet before this question can be answered.
Download the NAO's report, the Introduction of the Work Programme.
Paul Bivand
20 January 2012
