RICS Housing Market Survey - November 2007

1st November 2007

Data released this month showed that despite the recent drama in financial markets, the economy ploughed on regardless, indeed it actually accelerated.

According to the Office for National Statistics said, the UK economy grew at its fastest annual pace in more than three years between July and September.

Gross Domestic Product (GDP) grew by 0.8% from the previous quarter, raising the annual rate of growth to 3.3% during the period, above expectations of 3.1%, and the strongest rate since the second quarter of 2004.

Growth was driven by expansion in the service sector, particularly in hotel, restaurant and retail businesses.
This higher growth is one reason why the future of the labour market looks to be a solid one.

Already the picture is pretty good. Employment in the economy increased by 132,000 jobs in the year to August, an increase 0.3%. This has pushed unemployment down: the number of people claiming unemployment benefit has fallen in 14 out of the last 15 months.

The number of people made redundant fell by 15% in the year to the second quarter and is now at its lowest level since the figures started being collected in the second quarter of 1997.

People seem set to continue to find work in coming months. In 2007 Q3, the number of job vacancies (a leading indicator of future changes in unemployment) was at its highest level since records began in 2001. Furthermore, employment is a lagging indicator of economic activity.

Growth in economic output tends to generate additional jobs only after a lag.
With growth having accelerated in the past four quarters this should bode well for hiring in the coming twelve months.

Indeed, if this relationship were to hold then we should see employment growth of around 1.2% in the coming year, producing around 260,000 new jobs.

Full time employment lags temporary employment by around four quarters as well.

The reason being that firms tend to be cautious about hiring people, so they take on part-time staff first to make sure that another employee is really necessary.

Likewise in a downturn firms will stop hiring part time staff and let some existing part-time staff go before they begin to reduce their full time workforce.

In recent quarters temporary employment growth has accelerated and is now providing a signal that we are about to see faster full-time employment growth.

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