Bridget Rosewell

Employment in London - Forecasts

Background

•Provide a medium term outlook over 15 years

•Take into account structural shifts

•Avoid need to forecast uncertain drivers

Method

•Identify and analyse appropriate historical trends for London and component sectors•Identify breaks in trend over past period•Consider likelihood of future trends differing from the past•Construct trend figures•Adjust where trends considered likely to change

Employment Output RelationshipTotal employment (log) as a proportion of total London GVA

1971 - 2000

tim

Lo

g o

f to

tal e

mp

loym

en

t d

ivid

ed

by r

ea

l L

on

do

n G

VA

£m

n

1970 1975 1980 1985 1990 1995 2000

-3.2

-3.1

-3.0

-2.9

-2.8

-2.7

Implications

•If the economy grows on average at 2.5%

–And job creation over 30 year average rate, only 70,000 new jobs by 2016–With job creation at 90s rates, 1 million new jobs by 2016

•Because the move to services is more labour intensive and the decline in manufacturing largely complete

The SDS Forecast•Takes the underlying growth of 2.5%•Moderates the short term trend over the next decade back towards the longer term one•Takes a trend based view of all individual sectors, except two•Business services constrained so that share does not increase over 40%•Health and education adjusted upward

on policy grounds (50,000 jobs)

The Growth Question

•Growth has averaged 2.7% since 1982•Treasury assumption is 2.75% - recently revised up from 2.5% when the SDS was prepared•London can at least be expected to match the UK

Ouput Growth In London and the UK

-4

-2

0

2

4

6

8

1971 1976 1981 1986 1991 1996

London UK

Difference Between London and UK Growth

-4

-3

-2

-1

0

1

2

3

1971 1976 1981 1986 1991 1996

Growth: London and the UK•London grew less fast than the UK in the 1970s•In the 1980s at around the same rate•And possibly faster in the most recent years

London GDP at 2.5% and 2.75% growth1971=100

80

130

180

230

280

Job Creation

•How many jobs does growth create?•Over the 1981-2000 period, on average the economy had to grow 2.4%pa to stop employment falling•But over the 1990s, this rate was only 1.2%

London GDP & EmploymentGDP, 1971=100 & Employment 000s

80

130

180

230

280

3000

3500

4000

4500

5000

5500

GDP Employment

Numerical Change in Employee Jobs (between 1973 & 2000, 1973 & 1989, and 1989 & 2000)

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

Num

eric

al c

hang

e in

em

ploy

ee jo

bs

Manufacturing

Public Admin.& Defence

Transport andCommunicationsConstruction

Wholesaling

Health and Education

Agriculture, Forestry &FishingRetailing

Hotels & Catering

Other social and personalservicesOther Financial &Business ServicesBusiness Services

Banking & Insurance

1973 to 2000

1973 to 2000

1973 to 1989

1973 to 1989

1989 to 2000

1989 to 2000

History

•Employment fell in the 1970s and 80s•But has made up these falls in the 90s•Much of the fall is the decline in manufacturing in the capital•Services has grown throughout, especially business services

Business Services Trends Business services employment (log) as a proportion of total London GVA 1971 - 2000

Log

of b

usin

ess

serv

ices

em

ploy

men

t di

vide

d by

rea

l Lon

don

GV

A £

mn

1970 1975 1980 1985 1990 1995 2000

-4.9

0-4

.85

-4.8

0-4

.75

-4.7

0-4

.65

-4.6

0

1971

2000

1991

1980

1985

1996

1976

Employment in 2000 Primary and utilities

Manufacturing

Construction

Wholesale

Retail

Hotels & restaurants

Transport & comms

Financial services

Business services

Public administration

Health & Education

Other services

Employment in 2016 Primary and utilities

Manufacturing

Construction

Wholesale

Retail

Hotels & restaurants

Transport & comms

Financial services

Business services

Public administration

Health & Education

Other services

SDS Employment Forecast

2 0 0 0 2 0 1 6 D if fe re n c eP rim a ry a n d u ti l itie s 2 0 1 5 -5M a n u fa c tu rin g 3 2 8 2 4 0 -8 8C o n s tr u c t io n 2 1 5 1 6 0 -5 5W h o le s a le 2 7 5 2 9 0 1 5R e ta il 4 0 4 4 1 5 1 1H o te ls & re s ta u ra n ts 2 9 4 4 4 5 1 5 1T ra n s p o r t & c o m m s 3 6 1 3 2 5 -3 6F in a n c ia l s e rv ic e s 2 4 8 2 7 5 2 7B u s in e s s s e rv ic e s 1 1 2 3 1 5 9 0 4 6 7P u b lic a d m in is tr a t io n 2 2 7 1 7 5 -5 2H e a lth & E d u c a t io n 6 1 0 6 6 0 5 1O th e r s e rv ic e s 3 3 9 5 3 0 1 9 1

T o ta l 4 4 5 3 5 1 2 0 6 6 7

Other Views

•The SDS view not isolated•Other modellers provide similar figures•All based on strong growth FBS and stabilisation elsewhere

Average annual growth rate

SDS (2000-16

0.89

CEBR (2001-23)

0.88

OEF (2000-17)

0.78

Long Term Forecasts

0

1000

2000

3000

4000

5000

6000

7000

1982 1987 1992 1997 2002 2007 2012 2017 2022 2027

Year

Tota

l em

ploy

men

t ('0

00)

Volterra

OEF

Long term forecasts

0

500

1000

1500

2000

2500

Year

Tota

l job

s ('0

00)

OEF Business Services forecast

Volterra Business Services forecast

OEF Financial Services forecast

Volterra Financial Services forecast