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Presentation to defence college 13 january 2015
1. Economic and
employment trends to
2020 and beyond
Mark Beatson
Chief Economist
HR lecture to Defence College of Logistics, Policing and
Administration, 21 January 2015
2. Economic and
labour market
trends to 2020 and
beyond
• The economy will grow more
slowly in 2015 than it did in 2014
• The labour market will continue to
expand but wage growth growth
likely to remain in 1-2% corridor –
but lower inflation means real
terms increase?
• Wage and productivity growth
expected to be higher in 2016 –
but not a given
• Europe remains a risk
• Population ageing and technology
have visible effects
7. UK economic growth is expected to continue
-5
-4
-3
-2
-1
0
1
2
3
4
5
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
%changep.a.
GDP growth
7
Sources: Past data OECD, forecasts from OBR Autumn Statement 2014 Economic Forecast.
Forecast
8. Emerging economies continue to support
global economic growth
0
1
2
3
4
5
6
7
8
World USA Euro Zone Japan UK China India
%changep.a.
GDP growth
2014 2015 2016
Source: IMF World Economic Outlook., January upate.
10. Capital investment now exceeds pre-recession
levels but there is a potential backlog
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
2012Q1
2013Q1
2014Q1
Investment by sector, £ million)
Business investment
General government investment
0
5 000
10 000
15 000
20 000
25 000
30 000
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
2012Q1
2013Q1
2014Q1
Investment by asset, £ million)
Transport equipment
Other machinery & equipment
Dwellings
Other buildngs & structures
IP products
Source: ONS.
11. Intangible investments may have held up better than
tangibles
0
20
40
60
80
100
120
140
£billion
Tangibles Intangibles
Source: NESTA Innovation Index 2014
12. Fiscal consolidation – more to come
12
32
34
36
38
40
42
44
46
48
50
1948-49 1958-59 1968-69 1978-79 1988-89 1998-99 2008-09 2018-19
PercentofGDP
Current receipts
Total managed expenditure
Forecast
Source: ONS, OBR
13. Shrinking public sector employment
– more to come
0
1
2
3
4
5
6
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
General government employment (millions)
Source: OBR
16. Employers still expect to recruit
-19
-10
-3 -5
5
2
11
-3
3
-1 -3
-8
6 5 7 5
9
14
24
16
26
23
30
Netemploymentbalance
Three months ahead employment expectations
The net employment balance is the difference between the % of firms expecting to recruit over the next
three months and the % expecting to make redundancies.
Source: CIPD Labour Market Outlook.
17. Employers find that most vacancies attract
sufficient applicants
32
25
14
20
15
8
Low skill Medium skill High skill
Mean number of applicants for each vacancy advertised
Not suitable Suitable
Source: CIPD Labour Market Outlook survey, Autumn 2014.
18. Employers’ pay expectations remain
modest
1.5
1.6
1.5 1.5
1.3
1.6
1.5 1.5
1.7
1.5
1.6
1.7
1.8
1.7 1.7
1.6
2 2 2 2
Average predicted annual pay award (% p.a.)
Based on all employers expecting to have a pay review in the following 12 months.
Source: CIPD Labour Market Outlook.
20. The ‘cost of living crisis’ is largely a pay and
productivity issue
80
85
90
95
100
105
110
2001Q1
2001Q3
2002Q1
2002Q3
2003Q1
2003Q3
2004Q1
2004Q3
2005Q1
2005Q3
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
2008Q1=100
Output per hour
Real earnings deflated by CPI
Earnings data are the Average Weekly Earnings index, GB, seasonally adjusted. The middle month is used for each
quarter, e.g. Q1 uses the February observation.
Source: Office for National Statistics.
21. Official forecasts show little growth in real
earnings until at least 2016
-2
-1
0
1
2
3
4
5
2013 2014 2015 2016 2017 2018 2019
%changep.a.
Nominal earnings growth Real earnings growth (deflated by CPI)
Real earnings growth (deflated by RPI)
Source: Office for Budget Responsibility, Autumn Statement 2014 forecast.
23. The Euro Zone is growing - just
-1
-1
0
1
1
2
2
3
EuroZone Germany France Italy Spain
%changep.a.
IMF forecasts of GDP growth
2014 2015 2016
Source: IMF World Economic Outlook, January update.
24. Is potential deflation in the Euro Zone a worry?
-3 -2 -1 0 1 2
Bulgaria
Greece
Spain
Poland
Croatia
Slovakia
Cyprus
Estonia
Hungary
Slovenia
Portugal
Belgium
Denmark
Ireland
Luxembourg
Italy
Sweden
Netherlands
Croatia
EU
Lithuania
Euro Zone
France
Germany
Czech Republic
Malta
Latvia
Finland
United Kingdom
Austria
Romania
HICP inflation rate (% change
p.a., November 2014)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
HICP “core” inflation for Euro
area (% change p.a.)
“Core” HICP excludes energy, food, alcohol, tobacco
Source: Eurostat.
25. Most Euro Zone governments are heavily in debt
0
20
40
60
80
100
120
140
160
180
200
Euro
Zone
Germany France Italy Spain Portugal Ireland Greece Cyprus
%ofGDP
General Government debt/GDP ratio
2014 2015 2016
Source: European Commission, autumn 2014 forecast.
26. Unemployment will remain high in much of Europe
0
5
10
15
20
25
30
Germany UK EU Euro Zone Spain Italy Portugal Greece Cyprus
Unemployment as % of labour force
2014 2015 2016
Source: European Commission, autumn 2014 forecast.
27. Slow growth in Europe affects the UK
because of trade links
13.2
10
8.5
6.9
6.1
4.6 4.3
2.9 2.9
2
UK top ten goods export markets, 2013 (% of total exports)
Source: Office for National Statistics.
28. Labour market conditions in Europe are
likely to continue to affect migration patterns
69
48
0~
20
40
60
80
100
120
140
YE Dec
03
YE Dec
04
YE Dec
05
YE Dec
06
YE Dec
07
YE Dec
08
YE Dec
09
YE Dec
10
YE Dec
11
YE Dec
12
YE Dec
13
Thousands
Work-related migrants into UK
EU15 A8
Source: Office for National Statistics.
30. Emerging economies will become bigger
global players
22%
7%
16%
3%
15%
18%
7%
12%
Global GDP 2012
USA
Japan
Euro Area
UK
Other OECD
China
India
Other non-OECD
18%
4%
12%
2%
13%
28%
11%
12%
Global GDP 2030
USA
Japan
Euro Area
UK
Other OECD
China
India
Other non-OECD
Source: OECD, “Looking to 2060: Long-term global growth prospects”, OECD Economic
Policy Paper No. 3, November 2012.
31. -677
-94
1,387
770
-305
186
1,235
1,956
15-24 25-49 50-64 65+
Illustrative projections of change in employment by age group from
2012 baseline, thousands
2022 2032
Sources: CIPD calculations based on ONS 2012 Principal population projections and revised mid-year estimates for 2002 and 2007 , employment
rates for May-Jul 2002 and 2012 based on the Labour Force Survey and CIPD assumptions for employment rates for 2017 onwards.
Population ageing means the workforce will
in future contain more over 50s
32. The “hourglass” labour market? Jobs growth
strongest in highly skilled occupations (and
some low skill ones)
32
Source: UKCES “Working Futures 2012-22”
0 1 2 3 4 5 6 7 8
Elementary
Process, plant operatives
Sales and customer services
Caring, leisure and other services
Skilled trades
Admin and secretarial
Associate professional and technical
Professional
Managers and senior officials
Employment by occupational group (millions)
2022 2012 2002
33. And just for fun … Who will stay ahead of
the machines?
Job Probability that total employment will
fall in next 20 years
Recreational therapists 0.003
Dentists 0.004
Athletic trainers 0.007
Clergy 0.008
Economists 0.43
Technical writers 0.89
Retail salespersons 0.92
Accountants and auditors 0.94
Telemarketers 0.99
Source: Frey and Osborne, 2013
34. To find out more and join the debate
• Visit our website
http://www.cipd.co.uk/cipd-hr-
profession/whats-new/megatrends.aspx
• Read the Megatrends report and our five
follow-up reports
• Watch the video, listen to the podcast,
look at the infographic
• #megatrends
35. What does it mean?
• Impact on HR practitioners:
• Little scope for pay rises (especially in public sector)
• Will recruitment become more difficult?
• Impact on the policy debate:
• More public expenditure cuts/tax increases
• Low pay/productivity
• Migration/Europe
These are CIPD illustrative projections we produced for a recent research report on managing age diversity. Based on ONS population projections and assumptions about future employment rates (set out in the report).
Key point = total employment projected to grow by 10% between 2012 and 2032, from 30 million to 33 million. This is due to more people in employment over the age of 50, especially 65+.
Left hand side = predictions of whether numbers employed in a job will fall or not in next 20 years due to computerisation (don’t ask how these numbers arrived at, they are just a talking point). Jobs “safe” use physical dexterity, emotional empathy, interpersonal skills.
Right hand side chart – point is we will need to keep learning to say ahead of the machines. 50% of people in UK say they are learning new things.