Unemployment in West Midlands levels off

Job Centre PlusThe labour market figures released September 2010 show a mixed picture for the West Midlands, with increases in employment and decreases in unemployment, but evidence of a slowing of the recovery.

The claimant count reduced by just 600 out of 159,700, and the unemployment rate remained steady at 8.4%.

Worryingly, unemployment and the claimant count seem to be levelling off at a higher level than they were prior to the recession. With the impact of cuts in public spending yet to be seen, this could mean any knock-on effects in the form of future rises in unemployment could wipe out the recovery seen so far.

Key headlines

Unemployment in the West Midlands has fallen again, but the rate of decrease is slowing. There are 226,000 unemployed people in the West Midlands – 13,000 fewer than last quarter, and 58,000 fewer than a year ago. However, in order to return to the July 2008 level of 163,000, we would need to reduce the number of people unemployed by a further 63,000.

The number of people in employment rose by 38,000 over the last quarter. However, there are still fewer people in employment than prior to the recession, and those working part-time now make up a greater proportion of those in employment.

The claimant rate saw a very small decrease of just 600 this month.

Overall the indications are that the falls in unemployment are beginning to level off. Furthermore, the upcoming public sector cuts and the knock-on effects in the private sector are likely to result in renewed increases in unemployment.

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West Midlands particularly vulnerable to public sector job cuts

Public sector employment has grown significantly in recent years across the UK and has been the key driver of the economy’s expansion. But proposals announced by the government to make £83bn worth of cuts in public sector spending are forecast to lead to the loss of up to 600,000 public sector jobs across the UK over the next 6 years, according to a study1 by Oxford Economics.

The West Midlands economy is particularly vulnerable to the impact of the cuts. Between 1998 and 2008 (latest available figures), the West Midlands saw the most significant increase in dependence on public sector employment in the country2.

The share of jobs accounted for by the public sector increased from 22% in 1998 to 27% in 2008, a rise of 5 percentage points, bringing total public sector employment to some 637,000.

We forecast that between 2010 and 2016 there will be a net loss of nearly 50,000 jobs across the West Midlands and, based on the ratio of the number of private sector jobs dependent on public sector spending and the associated supply chain nationally, a further 310,000 jobs are at risk at private sector firms directly or indirectly reliant on public sector spending3.

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Unemployment in West Midlands fallen but still not back to pre-recession levels

Updated monthly data on the West Midlands labour market were released today by the Office for National Statistics.

Key headlines

  • Unemployment in the West Midlands has fallen — by 66,000 people over the last year, and 27,000 people in the last quarter. There are, however, 59,000 more unemployed people in the West Midlands than in February 2008.
  • Unemployment has fallen faster in the West Midlands than anywhere else in the country over the last year and in the last quarter. However, unemployment rose more sharply here than elsewhere earlier in the recession, so essentially this is a rebalancing of employment levels.
  • We’re not out of the woods yet. Employment levels have not yet reached their pre-​recession levels, and we’re expecting a significant loss of public sector jobs in the coming months, which could wipe out the recent drop in unemployment altogether.

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The multiple risk factors of worklessness

By isolating the ‘risk factors’ and certain combinations of ‘risk factors’ associated with a person’s chance of being out of work, new analysis from the West Midlands Observatory can help decision makers get to grips with the complex interplay of issues behind the current high rate of worklessness across the West Midlands.

The research is already informing the Department for Work and Pensions in its review of welfare policy, as it provides insights into the major factors influencing a person’s chances of being in or out of work. It shows that these chances can vary greatly according to the individual’s background and personal characteristics. The research demonstrates how combinations of factors such as having no formal qualifications or a long-term health problem or disability, or being a lone parent, affect a person’s chance of being out of work.

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Up-skilling and diversification are key to growth and job creation across the West Midlands

Targeting investment on higher value added sectors such as digital media and medical technologies, and developing a workforce with the right skills to service those sectors would significantly increase job growth and the prosperity of the West Midlands according to new research.

The research (pdf, 498kb), undertaken by the West Midlands Observatory, shows that the potential benefits of targeting investment are substantial. If workforce skill levels in the West Midlands were increased to match the England average, growth in Gross Value Added (GVA) — the measure of economic output per head of population — over the next 5 years would increase by 2 percentage points from 10% to 12% and net new job creation would nearly double from 11,000 to 21,000. If in addition more businesses in higher value added sectors and clusters were attracted to the West Midlands, so that their share of economic activity reflected the position nationally, GVA would grow by some 23% by 2015 and more than 200,000 net new jobs would be created.

Local authorities, business groups and other key partners across the West Midlands are looking to achieve sustainable economic growth in jobs and GVA over the next 5 years. This new research shows how, in a time of austerity and funding cuts, the Observatory can provide authoritative and objective research to help decision makers target limited resources and do more with less.

The research (pdf, 498kb) provides an insight into the region’s existing and likely future skill needs. It has been produced to inform the development of skills and investment priorities that focus shrinking levels of public sector investment in areas that will maximise  impact.

A range of key investment locations across the region, including Longbridge and Eastside in Birmingham, Ansty Park in Coventry, i54 in Staffordshire, Coventry and Wolverhampton city centres and Dudley, Telford, Walsall and West Bromwich town centres, can play a key part in diversifying local economies.

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A tough year for inward investment in the West Midlands

In 2009/10 there were 84 inward investment successes in the West Midlands and another four knowledge-based investments. These investments created over 1,500 new jobs and safeguarded another 4,300.

Of these 88 successes, Advantage West Midlands were involved with just under half but this assistance helped create over 60% of the new jobs.

Some of these inward investments were high-profile including Kraft’s acquisition of Cadbury in Bournville, Birmingham affecting nearly 3,000 employees at their head office as well many more around the country.

Other investments in the news included the acquisition of Birmingham City Football Club by Far Eastern businessman Carson Yeung’s Grandtop International, the continued expansion of the ex-Longbridge car plant by SAIC of China where a new engine test facility is to be built and the taking on 50 skilled engineers by Indian Tata Group’s Jaguar Land Rover.

Some other notable inward investments included:

  • Expansion of Japanese tool-maker Makita‘s manufacturing facility in Telford, which created 70 jobs
  • Expansion of TK Maxx‘s distribution depot in Newcastle-under-Lyme, Staffordshire, which created 100 jobs
  • FourStar from the Netherlands is to open a new UK headquarters in Birmingham employing over 250 people to provide employment and skills training to the unemployed

Two other investments from the United States also catch the eye. Remotec in Coventry, a subsidiary of Northrup Grumman, expanded its facility designing and manufacturing robotic bomb disposal units.

But it’s the opening of a new computer games design studio in Digbeth, Birmingham by Microsoft-owned Rare Games that’s hoped will give a boost to games design in the Midlands. 90 new games designers will be employed there.

Analysis of West Midland inward investment

Further analysis of the inward investment figures show that, with 88 investments, 2009/10 saw the fewest number of investments in the  West Midlands since 2005/06 when investment numbers were still recovering from the falls in global investment since 2001. This highlights the fact that the global economic crisis began to seriously affect investment decisions.

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West Midlands sees large fall in unemployment

The latest regional labour market statistics (zip, 2.9mb), released by the Office for National Statistics, show a large quarterly fall in the unemployment rate in the West Midlands, down 23,000 people to 230,000 (8.6%) in the quarter to May. This is the largest fall of any English region.

Unemployment in the West Midlands rose sharply at the beginning of the recession and peaked in April to June 2009 at 284,000 people or 10.5% – the highest unemployment rate of any English region.

Since then, unemployment here has fallen, whereas other regions have continued to see a rise. The West Midlands now has the fourth highest unemployment rate of English regions.

There’s also been a fall in the number of people claiming Jobseeker’s Allowance, the unemployment benefit. The number of claimants in the West Midlands fell to 159,800 in June, a fall of 2,800 people. This is a smaller decrease than in previous months but is 24,800 claimants fewer than the peak in October 2009.

Within the West Midlands, nearly all local authorities have seen a fall in the number of people claiming Jobseeker’s Allowance over the last year. The biggest decreases have been in areas like Cannock Chase and Redditch which saw large increases in Jobseeker’s Allowance rates at the beginning of the recession.

Our interactive map shows how Jobseeker’s Allowance rates differ between local authorities.

The fall in unemployment has been accompanied by a rise in employment. The employment rate in the West Midlands is now 71.2% with 31,000 more people in employment than in the previous quarter.

Nationally the rise in employment was largely due to a rise in the number of part-time workers. Data on part-time workers at regional level is only available up to September 2009 (national data are for the quarter to May 2010) but does show that the number of part-time workers in the West Midlands increased during the recession even though the number of people in full-time employment fell.

More information on changes to the labour market during the recession are available in our economic inclusion annual report 2010 (pdf, 929kb).

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