South West jobless rate improves but construction output falls
The South West has the lowest rate of unemployment of all regions, according to the latest Economic Indicators, published December 2012.
Over the period July to September 2012, the North East had the highest unemployment rate, at 9.8% of the economically active population compared to 5.8% in the South West.
The national unemployment rate fell to 7.8% and employment grew to 29.6 million over the quarter to September.
CPI inflation rose slightly to 2.7% in October, up from the two year low of 2.2% recorded in September.
The second release of GDP data for Q3 2012 left unchanged the preliminary estimate of 1% growth in the economy - the largest quarterly rise since Q3 2007.
The ONS commented that the reduction in working days (due to the Diamond Jubilee) in the second quarter of 2012 and the hosting of the Olympic and Paralympic Games in the third quarter of 2012 might explain why growth seems so buoyant compared with previous quarters.
The economy grew by an estimated 1.0% in Q3 2012 (the largest quarterly rise since Q3 2007), following a contraction of 0.4% in Q2 2012. In November, HM Treasury's average of independent economic forecasts of GDP growth for 2012 was -0.2% and 1.1% for 2013. The Office for Budget Responsibility's (OBR) central forecasts from March 2012 are 0.8% growth for 2012 and 2.0% for 2013.
Average earnings have fallen in real terms in recent years, as inflation has outpaced wage growth.
In the UK, median gross weekly earnings of full-time employees were £506 in April 2012, a rise of 1.5% from £498 in April 2011.
Over the same period, consumer prices (as measured by the CPI inflation measure) rose by twice that amount: 3.0%. 2012 was the fourth successive year in which inflation was higher than earnings growth.
Over that time period the cumulative real terms decline in median full-time earnings was 7.1%.
The gender pay gap - how much more men are paid than women for full-time hourly pay - narrowed from 10.5% in April 2011 to 9.6% April 2012.
This gap, however, is not uniform; the gender pay gap varies depending on age group, with older age groups seeing a much larger gender pay difference.
In fact, the median wage for women aged 22-29 in full-time employee jobs is higher than for men.
The briefing paper includes a special paper on the UK construction industry, which in 2011 was worth £89.5 billion or 6.7% of the total UK economy.
The construction sector has suffered in recent years and output has declined by a greater proportion than the whole economy. Between Q1 2008 and Q1 2010, construction output fell by 17%, compared with a 6% fall in the economy overall.
Since then, output in the whole economy has been broadly steady at around 4% below the Q1 2008 level, but output in the construction sector has fluctuated. Construction output increased by 7% over the year to Q1 2011, but the sector suffered another sharp contraction in the first three quarters of 2012. Between Q4 2011 and Q3 2012, construction output fell by 10%, to 18% below the Q1 2008 level.
These fluctuations reflect the fact that the construction sector is "disproportionately affected" by downturns in the economy compared with other sectors. When economic confidence is low, people are less attracted to large and long-term investments such as construction projects - the financial crisis resulted in the value of orders to the construction sector falling by 33% between Q1 2008 and Q1 2009.
27% of new orders in the construction sector (by value) were for house building in Q2 2012. This compares to 19% for infrastructure, and 29% for private commercial projects (excluding infrastructure).
Following the financial crisis, the construction sector became increasingly reliant on infrastructure projects, and the proportion of orders from this sort of project rose from 8% in mid-2007 to 24% in mid-2009. On average, infrastructure has represented 18% of orders in each quarter since 2008, compared with only 11% of orders in each quarter during the period 1980-2008.
House building orders as a proportion of construction sector orders fell during the late 2000s to a low of 15% in the early part of 2009. A similar reduction occurred in the proportion of orders from private commercial projects around the time of the financial crisis. Private commercial orders represented 46% of orders in mid-2006, but only 23% in mid-2009.
Between Q1 2009 and Q1 2011, the value of housing orders grew by 87%, although it should be noted that Q1 2009 was the post-Second World War low in terms of the value of house building orders. This increase resulted in house building orders increasing as a proportion of all construction orders to pre-crash levels.
The increase in the value of housing orders in 2009 and 2010 has not resulted in a significant increase in the numbers of houses being built.
This is partly explained by the fact that the increases in orders 2009 and 2010 were not sufficient to bring the value of house building orders back up to the pre-2008 levels. In addition, house building is a lagging indicator of the state of the construction industry. It takes some time for an order to a construction firm to result in a completed house.
A more responsive indicator of activity in the house-building sector is the number of houses started. When economic confidence is high, the number of houses started generally rises, and there tend to be more housing starts than completions. When confidence is low, starts are often outnumbered by completions, as orders for new housing dwindle.
As the economy stalled, there was a striking fall in the number of houses started - there were 54% fewer starts in Q1 2009 compared with Q1 2008. The number of starts recovered in 2009, but has fluctuated since then. The number of housing starts in Q3 2012 was still 30% down on Q1 2008.
The number of houses completed in England is at a historically low level. 2010 saw fewer houses completed than in any year since 1946. 2011 saw 114,000 houses completed, the second lowest annual total since 1946. The 2011 total is 35% lower than the number of houses completed in 2007.
House building represents almost a third of construction orders and has recovered better than other sub-sectors in the industry since the financial crisis. The strategic importance of house building means that its continued growth is essential if the government is to meet its aim of a "successful construction industry."
But the barriers to growth in house building are many and complex. They include limited access to credit and planning restrictions, neither of which can be overcome quickly or easily.
Read the full Report here Economic Indicators 12/12 [846kb]
