Will employment's magical levitating trick continue?

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It is expected the unemployment rate will stay the same at 7.7 percent.
It is expected the unemployment rate will stay the same at 7.7 percent. Photo: Martin Rickett/PA Wire/Press Association Images

Will the mystery continue for another month?

Employment has performed a magical levitating trick through 2012 despite a flat economy - normally at this stage in the cycle we’d expect to see huge waves of people out of work but quite the opposite has held true.

Can the positive news roll into 2013? On Wednesday we’ll get the latest data.

Economists polled by Reuters expect yet another fall in the January claimant count as five thousand fewer people claimed jobless benefits.

They expect the unemployment rate to have stayed the same at 7.7 percent in the three months to December and average wage growth to stay the same at 1.4 percent.

There are innumerable theories why this should be.

One is that companies have preferred to hold on to staff even though there’s not enough work to keep them busy.

This is called labour hoarding and makes sense especially in manufacturing where staff have education and skills that are hard to replace if they’re sacked and then business picks up.

This idea is disputed by some eminent researchers who say the flows into employment have been too strong for too long for it just to be down to hoarding, but a big survey of employers this week by the Chartered Institute of Personnel and Development (CIPD) seemed to back it up.

Average wage growth in the UK is predicted to stay the same at 1.4 percent.
Average wage growth in the UK is predicted to stay the same at 1.4 percent. Credit: Dominic Lipinski/PA Wire/Press Association Images

The CIPD also highlights the increased numbers of part time and temporary workers - many of whom would rather be working more hours or enjoying staff contracts rather than the insecurity of a flexible contract.

Another theory is that it is this very flexibility which is allowing companies to hang on to staff despite the wider economic downturn.

Low wage growth – remember that forecast 1.4 percent growth I mentioned - is another factor keeping people off the dole although it does mean that households have been feeling the squeeze as inflation (currently at 2.7 percent) raises prices faster than incomes).

We know that there will be many hundreds of thousands of redundancies from the public sector over the next couple of years as austerity cuts take their toll.

With the surge of retail companies (Comet, Republic, Blockbuster) announcing redundancies, too, it is hard to see how the magic headline number can continue to defy gravity.

Will the private sector continue to create enough new jobs to re-employ ex-government workers? Will the hoarding companies continue to hoard?

It depends on the economy: two-thirds of the companies which told the CIPD they were hanging on to staff said they, too, would make redundancies if things don’t pick up this year. A lot rests on that recovery.

Read: More on the collapse of high street retailer Comet in December last year.

Read: More on high street chain Republic's announcement that there will be over 150 redundancies this month.

Read: Blockbuster confirmed last week that it will close 164 stores on top of the 168 stores previously put on notice of closure.