Jobs galore, now get productive

THE j obs are back. There are a mass of open positions in the hospitality industry – we all know about that – but there are also thousands of jobs for professionals from the big consultants, such as EY, PwC and KPMG, and from the banks, led by Citi. The job market is now for the first time even stronger than it was on the eve of the pandemic last year.

This is quite separate from the chaos imposed by the call for people to self-isolate because they have been pinged by the Covid app, and it is separate from the distortions that have followed the continuation of t he f urlough scheme. These are permanent jobs right across the skill range.

How do we know? There is anecdotal evidence and that always gives us an early feeling for what is happening to the economy.

Right now, you can catch the pressure of labour demand simply by walking down a high street and seeing the adverts in shops, pubs and restaurants for staff. But last week, we had two studies that give a more precise measure of the strength of the market.

One came from Indeed, a US corporation that runs the world’s (and the UK’s) largest online employment website. London had been lagging in the recovery but has caught up, with job adverts now running 2 per cent up on February 2020.

EY was number one, posting more new London vacancies between February and the middle of July than anyone else. Citi and PwC were just behind.

The other study was by the Recruitment & Employment Confederation, which tracks new job ads. In the week to July 18 there were 194,000 new jobs posted. That compares with 179,000 in the first week of March last year and, aside from a jump this May, is the highest since the pandemic struck.

Out of the top ten UK areas seeing more demand for labour, London boroughs had six.

There are several ways you can look at this. Employers report the worst labour shortages since 1997, which is tough if you are trying to run a business but great if you are looking for a job.

Low-end wages are being bid up, reflecting a shift of power that may run for quite some time. Anyone who cares about income inequality must welcome that.

If you are interested in the impact on the nation’s finances, this is good news too. Receipts from income tax and National Insurance contributions are above pre-pandemic levels. If employment and pay climb solidly, this will give hope for a faster correction to the Government deficit than the Office for Budget Responsibility expected at the time of the Budget last March.

On the other hand if wages really do take off and higher costs start pushing up prices then the Bank of England will have to abandon its ‘wait and see’ policy and think about raising interest rates sooner than the markets currently expect. We must hope that companies will figure out ways to absorb those higher costs.

That leads to something that is really important. Stand back from the chaos of the moment and think about the long-term impact of a truly strong labour market on the economy as a whole. How do we increase productivity or, put more directly, how do we use people better?

The UK does not have a good productivity record. The Bank of England has done a lot of work on this and concludes that the problem is not at the top of the league – the best UK companies are wonderful – but through the middle and lower ranks. There is a long tail of low performance. To oversimplify, thanks in part to easy access to migrants from lower-waged countries in Europe it has been easier to meet demand by piling on more labour than figuring out how to use the people you have more efficiently.

The UK has been brilliant at creating jobs, but not so good at increasing the productivity of those jobs. That is the next task.

This will be a marathon, not a sprint. The economy has coped extraordinarily well with the greatest disruption it has ever faced in peacetime.

Online shopping, restaurant deliveries, working from home and so on – that transformation has been extremely testing, and we are not through it yet.

But we have all learnt a lot about running things differently, even if it is just improving our online competence. Let’s celebrate this surge in demand for people. Let’s cross our fingers that it continues once furlough ends. And let’s all of us think about ways to do everything a little better in future.

We have piled on labour, but not figured how best to use it