1. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 1 North East Quarterly Labour Market Snapshot Next update due September 2010 A quarterly, regional and sub-regional labour market overview, prepared by the EAU Economic Analysis Unit, ONE North East Will Haywood Tel: 0191 229 6712 Email: william.haywood@onenortheast.co.uk Click back to navigation page June 2010

2. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 2 1.Overview - SURVEY OVERVIEW Slide 3Slide 3 - NATIONAL STATISTICS OVERVIEW Slide 4Slide 4 2. Economic Activity Slide 5 Slide 5 3. Employment Slide 6 Slide 6 4.Unemployment - OVERVIEW Slide 7Slide 7 - REGIONAL COMPARISON Slide 8Slide 8 - STOCK BY GENDER/OCCUPATION Slide 9Slide 9 - CHANGE BY OCCUPATION Slide 10Slide 10 - CHANGE BY SUB-REGION Slide 11Slide 11 - CHANGE BY DISTRICT Slide 12Slide 12 - AGE AND DURATION Slide 13Slide 13 - GENDER Slide 14Slide 14 5. Benefit Claimants - TYPE AND SUB-REGION Slide 15Slide 15 6. Vacancies Slide 16 Slide 16 7.Earnings - DISTRICT BREAKDOWN Slide 17Slide 17 Annex: - DEFINITION OF KEY MEASURES Slide 18Slide 18 - DETAILED OCCUPATIONAL CHANGE Slide 19Slide 19 Click back to navigation page

3. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 3 OVERVIEW – SURVEYS The May Purchasing Managers’ Index suggests that the region’s labour market is continuing to move towards a broadly stable picture Click back to navigation page North East and UK PMI Employment Index The RDA/Markit Purchasing Managers’ Index (PMI) are monthly surveys of companies which provide a timely indication of what is really happening in the private sector economy across both manufacturing and service sectors. The employment index asks whether the level of employment at the company is higher, lower or the same than one month ago. A score of 50 suggests no change whilst a score greater than 50 suggests employment expansion and a score less than 50 employment contraction. It is important not to take one months data in isolation but the table opposite and graph below clearly show the overall trend towards stability Rising Falling PMI Employment Index – regional comparison - Whilst May was the 3 rd consecutive month where staffing levels rose, the rate of increase was a little lower than that observed in April - May saw employment numbers in both the manufacturing and service sectors rise somewhat - Anecdotal evidence suggested that new personnel were hired in response to increased workloads RDA/Markit Purchasing Manager Index ® Employment contraction started at a similar time to the UK and around the time the country entered recession Pace of employment contraction in the region reaches record levels around the turn of the 2008/09, still broadly tracking the UK Small employment increases in the past few months Broadly mirroring the national picture, the North East labour market is slowly getting back to a level of stability

4. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 4 OVERVIEW – NATIONAL STATISTICS IndicatorLatest periodNorth EastUK Level (000’s) Rate (%) Change on year (level) Change on qtr (level) Level (000’s) Rate (%) Change on year (level) Change on qtr (level) EmploymentFeb-Apr 20101,15469.481428,86572.1-2135 ILO unemploymentFeb-Apr 20101199.3152,4727.919223 Economically activeFeb-Apr 20101,27276.7241331,33778.5-2128 Economically inactiveFeb-Apr 201037123.3-15-128,18621.529829 Claimant count unemployment*May 201079.85.0-5.0-5.21,481.13.9-58.2-95.6 Workforce jobs**Dec 20091,147--25830,708--55138 Key points  The North East employment rate is 2.7% lower than the UK average – around half the employment gap we saw a decade ago  At 9.3% the region’s ILO unemployment rate is the second highest in the UK behind Yorkshire & The Humber  The NE ILO unemployment rate was up from 8.3% 12 months ago – a rise of 1.0%. This was somewhat higher than the UK rate increase – from 7.3% to 7.9%  Whilst the trend in unemployment is still up and is likely to remain so for some time, a major part of the unemployment increase seen during the recession, which officially ended in the final quarter of 2009, occurred in the latter half of 2008 and the early months of 2009  North East JSA unemployment rose from its pre-recession low point of 46,900 in January 2008 to a recent high of 87,700 in October 2009 – a rise of 87%. UK JSA unemployment had its pre-recession low in March 2008 (780k) and a high in October 2009 (1.63m) – a rise of 109% Click back to navigation page Office for National Statistics. Note that all data in this snapshot are sourced from ONS or NOMIS unless otherwise stated. ** Figures not seasonally adjusted. * Throughout this note the claimant count rate is presented as the number of JSA unemployed as a % of the resident working age population.

5. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 5 ECONOMIC ACTIVITY Despite the downturn, active participation in the labour market remains historically high - North East economic activity rates are presently some 2% below national rates. Whilst this gap is close to half what is was a decade ago it still means that the North East has around 30,000 additional residents detached from the labour market, for whatever reason, than nationally Activity rate - The past year has seen some significant fluctuations in economic activity and activity rates (employed + unemployed) in Feb-Apr10 were around 1% up on the same quarter 12 months earlier. Despite some decline in the economically active population in the latter months of 2008 and the early part of 2009, the recent pick up means the present rate is still one of the highest seen for many years and has closed the activity gap to the UK Age breakdown - The latest data for the year to September 2009 shows that economic activity rates remain highest in the 35 to 49 age group, with 9 in 10 men and 8 in 10 women economically active in the region. The 25 to 34 age group has similarly high rates of activity although rates for women in this age range are marginally lower at around 75% - Of the 8,000 additional economically active North East residents over the year to September 2009, the majority of the increase was accounted for by those aged between 18 and 34 Click back to navigation page Office for National Statistics * Shaded areas on graph indicate extent of sampling variability i.e. 95% confidence intervals Top end of North East range* now closer to UK rate UK activity rate remains well above top end of North East range* North East closes the gap

6. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 6 EMPLOYMENT - There has been significant regional employment growth over the past decade - The number of employed people living in the North East was broadly stable for the 3 years up to the end of 2008 and whilst the first few months of 2009 in particular saw numbers begin to decline, more recently numbers have started to pick up again - Since 1999, the North East’s employment gap - the increase in regional employment required to match the national employment rate - has fallen from over 120,000 to around 60,000 - However, the early impact of the economic slowdown in the region saw progress begin to stall but after reversing slightly during the first half of 2008 the gap is showing tentative signs of beginning to close once again The employment gap was halved over the past few years - Whilst progress stalled during 2008 the gap has now stabilised at around half the level it was ten years ago Click back to navigation page Office for National Statistics Shaded areas on graph indicate extent of sampling variability i.e. 95% confidence intervals

7. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 7 UNEMPLOYMENT: OVERVIEW - Typically unemployment tends to increase during a recession and continue to increase at more moderate rates even as the economy recovers - The four years following the 1979/81 recession saw claimant count unemployment increase by over 100,000. However, the regional economy was undergoing major structural change at this time and such a repetition is unlikely - The equivalent point in the 1990/91 recession around late 1992 saw unemployment increase pick-up again after a period of relative stability Since early 2008, JSA has risen substantially – broadly in line with previous recessions – but from a significantly lower starting point - Whilst the rise in JSA during February 2009 (6,200) was the highest monthly increase since December 1980, the rate of job loss through the remainder of 2009 was much less and indeed the four months to May 2010 each saw JSA fall. However, there is still a great deal of uncertainty in the labour market and whilst there are very tentative signs of improving hiring intentions in the private sector, this positive intent remains fragile and because of the symbiotic nature of the public and private sectors may potentially be negated or even reversed by public spending entrenchment Click back to navigation page Office for National Statistics Rising Falling

8. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 8 UNEMPLOYMENT: REGIONAL COMPARISON The North East JSA unemployment rate* stood at 5.0% in May 2010 – only Northern Ireland had a higher rate. However, this rate is 0.5 points lower than the recent high of 5.5% observed as recently as January. - North East unemployment broadly started to increase at the same time as most of the rest of the country – in the early months of 2008 and also peaked at around the same time during late 2009 - From a low point of 2.9% in January 2008 North East JSA rose to 5.5% by September 2009 – a rise of 2.6 percentage points, matching Yorkshire & The Humber’s point increase but below that observed in the West Midlands (2.8% up) and Northern Ireland (3.0% up) - May JSA rates are down slightly on the peaks outlined in the graph opposite across all parts of the UK apart from Northern Ireland. However, this marginal recovery in the labour market remains extremely fragile - Whilst North East JSA unemployment has fallen slightly in recent months the region still has one of the highest JSA rates in the country at 5.0% in May 2010. This compares with the UK average of 3.9% and is the second highest in the country behind Northern Ireland with 5.1%. The South West has the lowest rate in the UK at just 2.6% Click back to navigation page Office for National Statistics * The JSA unemployment rate denominator is the region’s resident working age population. The UK position is at the origin i.e. JSA peak of 4.3% and trough to peak 2.3 point increase

9. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 9 UNEMPLOYMENT: STOCK BY GENDER/OCCUPATION The occupations sought by people claiming JSA varies for men and women In May 2010 male JSA unemployment stood at 58,800 with nearly 3/4 of claimants seeking work in three broad occupational groups – Elementary Occupations (e.g. construction and other labourers), Process, Plant & Machine Operatives (e.g. factory workers and drivers) and Skilled Trades (e.g. construction and vehicle tradesmen). There were 20,500 women claiming JSA in May 2010. 88% of female claimants were seeking work in four occupations – Administrative and Secretarial Occupations (e.g. general office assistants and receptionists), Personal Service Occupations (e.g. nursery nurses and hairdressers), Sales and Customer Service Occupations (e.g. sales assistants and retail cashiers) and Elementary Occupations (e.g. bar staff and kitchen and catering assistants) Click back to navigation page Office for National Statistics

10. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 10 UNEMPLOYMENT: CHANGE BY OCCUPATION Whilst North East JSA has fallen slightly in the past 12 months, Personal Service and Sales and Customer Service Occupations have seen unemployment continue to rise - There were 16% more people seeking work in Personal Service Occupations and claiming unemployment benefits than a year earlier in May 2009. Similarly there were 10% more JSA claimants in Sales and Customer Services - All other occupational groups saw lower JSA numbers in the year to May 2010 but falls were on a much smaller scale as compared with the increases over the year to May 2009 - During the recession some of the largest percentage increases in JSA were observed in the higher level, skilled occupations Click back to navigation page - Sales and customer service occupations – in particular Sales assistants and retail cashiers saw a significant rise in JSA over the past year. There were 15% or 1,500 more shop workers looking for work in this sub-occupation group in May 2010 than in May 2009 - The graph below shows the numerical increases in JSA in the female dominated Personal Service sub-occupations - The bulk of the additional 600 JSA claimants in Personal Services are seeking jobs such as care assistants, educational assistants, animal care assistants and hairdressers Office for National Statistics

11. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 11 UNEMPLOYMENT: CHANGE BY SUB-REGION Click back to navigation page County Durham was particularly hard hit by high rates of unemployment increase during the early part of the recession - The vast majority of the unemployment increase in the past two years occurred over the six month period between September 2008 and March 2009 both nationally and regionally – in the graph below this is shown as the higher rate increases in the May-Nov08 and Nov08-May09 periods - Whilst the JSA increase in the North East as a whole broadly reflected national trends, County Durham in particular saw the largest percentage increases early on in the recession. County Durham was also the only sub- region to see JSA increasing at above national rates during the recession - Whilst Tees Valley saw some of the lowest percentage increases in the region in the first 12 months of the downturn, the latter months of 2009 saw JSA continue to increase whilst starting to stabilise regionally and nationally - In numerical terms JSA stocks have increased the most in Tyne & Wear. Since the recession began Tyne & Wear has accounted for approximately 43% of the increase in unemployment – 14,900 more claimants in May 2010 than in November 2007 out of the region’s total increase of 34,300 over this time - Tees Valley accounted for 30% of the region’s JSA increase, County Durham 19% and Northumberland 7% Office for National Statistics

12. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 12 - The map opposite shows the district level JSA claimant count rate in May 2010 – the darker the shading the higher the JSA rate - The graph below shows how JSA increased through the recession – for comparison from May 2007 to May 2010 the North East JSA rate was up 1.9% and the UK rate up 1.6% UNEMPLOYMENT: CHANGE BY DISTRICT Unemployment is affecting all parts of the region and increased in places which have both historically low and high unemployment levels and rates Click back to navigation page Office for National Statistics The JSA unemployment rate denominator is the resident working age population. South Tyneside Hartlepool Middlesbrough Blue – County Durham Yellow – Northumberland Green – Tees Valley Red – Tyne & Wear

13. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 13 UNEMPLOYMENT: AGE AND DURATION Whilst the under 25s have had a historically higher rate of unemployment than older people, it is the over 25s that saw the greatest percentage increase in unemployment through the recession - Unemployment increased across all age groups during the recession - Despite growing at a marginally slower rate than for older age groups, unemployment amongst the Under 25s is still a significant problem with 21.8%* of 16-24s classed as ILO unemployed in the region for the period October 2008 to September 2009. This compares with an unemployment rate of 7.3% for 25-49s and 5.2% for the 50+ age group Click back to navigation page - The past decade has seen the structure of the duration of unemployment change slightly. Up to the start of the recession the trend had been towards claims that last for a shorter time with the long- term unemployed, over 12 months claiming, making up a far smaller proportion of the total JSA stock than in the past. However, this trend has reversed during the recession with longer-term unemployment resurfacing as an increasing problem - The graph also clearly shows how seasonality affects the distribution of duration with unemployment peaks occurring in early Winter and the troughs in early Summer Office for National Statistics * Annual Population Survey estimates

14. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 14 UNEMPLOYMENT: GENDER Recent JSA numbers suggest some stabilisation in the claimant count for both genders. However, economic conditions remain fragile and on balance unemployment is expected to be higher at the end of 2010 than at the start - In numerical terms JSA unemployment decreased by a total of 5,200 in the three months March, April and May. Male unemployment was down by 5,300 whilst female JSA was up 100. This contrasted with 12 months ago when the three months to May 2009 saw JSA increase significantly by 6,400 - By May 2010 the JSA claimant count rate* in the region stood at 5.0%, comprised of 7.1% for men and 2.7% for women. Equivalent UK rates were 3.9%, 5.3% and 2.3% respectively - ILO unemployment in the region has risen for men in particular over the recession. From the Feb-Apr’08 quarter to the Feb-Apr’10 quarter male unemployment rose by 20,000 (up 39%) and female unemployment was up by 9,000 (up 23%)**. The overall rise was 29,000 or 32% - UK ILO unemployment rose by 49% over the same period comprised of a 60% increase for men and a 35% rise for women - By the Feb-Apr’10 quarter the headline ILO unemployment rate in the North East was 9.3%, comprised of a rate of 10.6% for men and 7.9% for women. Equivalent UK rates were 7.9%, 9.0% and 6.6% Click back to navigation page Office for National Statistics * The number of JSA unemployed as a % of the resident working age population. ** See Slide 19 for an explanation of the differences between JSA and ILO unemployment

15. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 15 BENEFIT CLAIMANTS: TYPE AND SUB-REGION Whilst there has been an increase in most benefit groups over the period February 2008 to November 2009, the latest DWP longitudinal study data suggests that the number claiming Incapacity benefits continues to decline The North East has the highest proportion of its working age population in receipt of some sort of benefit – over 1 in 5 or 20.4% in November 2009 representing 325,400 people. Northumberland is the sub-region with the lowest claimant rate – 16.1% of working age people in the county are claiming benefits, just above the national average of 15.8%. County Durham has had persistently high rates of incapacity benefit claimants in recent years and this remains the case with 10.5% of the population claiming IB or ESA (Employment and Support Allowance). Tees Valley continues to have the highest rates of lone parent claimants in the region Across the region there was a 9.3% increase (representing 27,800 people) in the overall number of working age benefit claimants over the period February 2008 to November 2009. The Incapacity benefit/ESA and lone parent client groups showed decreases over the year with falls of 4.0% and 5.6% respectively. A rise of 32,000 in the number of JSA claimants (up 63.3%) contrasted with a fall of 6,400 in the number on Incapacity benefit/ESA. The remaining client groups accounted for 2,200 additional claimants in November 2009 compared with February 2008 Click back to navigation page Office for National Statistics

16. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 16 VACANCIES Vacancies showing signs of picking up January, March and May were the first months since November 2008 that notified vacancies were higher than 12 months previously May 2010 saw around 3,200 more vacancies notified to North East Jobcentre Plus offices than in the same month a year earlier. In May 2009 there were 15,500 notified vacancies and by May 2010 this level had risen to 18,700 – an increase of 21%. However, this percentage change was not mirrored across all sectors of the North East economy One sector in particular saw vacancies running well above those seen one year ago. Business Services & Finance had 3,100 additional vacancies when compared with May 2009 – a rise from 8,300 notified vacancies 12 months ago to 11,400 in May 2010. Two sectors continue to see vacancies, as they generally have been throughout the past year, running below levels compared to the same month 12 months previously. These sectors are Construction and Distribution, hotels and restaurants Click back to navigation page Office for National Statistics

17. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 17 - Earnings in the North East are low compared with many other parts of the UK - Low earnings are strongly correlated with low levels of productivity - Whilst the main determinant of levels of pay is the industrial and occupational structure of the area it is also true that levels of pay vary across the country for comparable jobs. This effect is least apparent in sectors with national pay bargaining such as the majority of the public sector Latest figures - The recession has already impacted significantly on wages. A recent business survey* suggested that 15% of the region’s businesses had cut wages in 2009 and 12% expect to lower salaries during 2010 EARNINGS BY DISTRICT The average level of earnings varies considerably across the region. In 2009, no North East unitary/district had earnings above UK levels Click back to navigation page Office for National Statistics, ASHE workplace based estimates. The blue bars represent pre-2009 County Durham districts, yellow – pre-2009 Northumberland districts, red – Tyne & Wear metropolitan districts and green – Tees Valley unitaries * National Business Survey, November 2009, Ipsos MORI/RDAs

18. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 18 ANNEX: DEFINITION OF KEY MEASURES There are 2 generally accepted ways to measure unemployment – the International Labour Organisation (ILO) classification measure from the Labour Force Survey (LFS) and the Claimant Count measure aka Job Seekers Allowance (JSA). The ILO is a wider measure whilst JSA is limited to benefits only but both follow broadly similar trends International Labour Organisation classifications Unemployment measure AdvantagesDisadvantages Claimant count100% count. Timely. Precise information about small areas. Affected by changes to the benefit system from which it is derived. Coverage restrictions – especially women. Not internationally comparable. ILO countIndependent of the benefit system. Internationally comparable. Large survey. Rich source of data. Based on a sample (LFS household survey) and therefore prone to significant sampling errors. Communal establishments not included. Pros and cons of the two measures Click back to navigation page Office for National Statistics. Note that the ILO measure jumps around due to sampling error. For example, the sampling variability (with a 95% confidence interval) of ILO unemployment in Dec’09 (mid-point of Nov-Jan’10 quarter) was 120,000 +/- 17,000. This broadly means that there is a 95% chance that the ‘true’ level of unemployment lies between 103,000 and 137,000. The scale of this sampling error remains fairly consistent over time.

19. North East Labour Market UpdateJune 2010 EAU Economic Analysis Unit Sources/notes: 19 ANNEX: DETAILED OCCUPATIONAL CHANGES Corporate Managers Up 1,030 or 119% Health Professionals Up 5 or 20% Science & Technology Professionals Up 560 or 145% Sales occupations Up 4,875 or 69% Managers & Proprietors in Agriculture and Services Up 240 or 77% Process, Plant & Machine operatives Up 3,050 or 81% Caring Personal Service occupations Up 1,530 or 78% Science & Technology Assoc Profs Up 585 or 89% Customer Service occupations Up 870 or 70% Biennial rise in NE JSA = 37,385 or 73% Administrative occupations Up 2,205 or 62% Secretarial and related occupations Up 265 or 62% Skilled Agricultural Trades Up 410 or 44% Leisure or other Personal Service occupations Up 565 or 83% Teaching & Research Professionals Up 160 or 52% Business & Public Service Professionals Up 315 or 185% Health & Social Welfare Assoc Profs Up 205 or 72% Protective Service occupations Up 80 or 160% Culture, Media & Sports occupations Up 570 or 81% Business & Public Service Assoc Profs Up 425 or 81% Skilled Metal and Electronic Trades Up 2,620 or 149% Skilled Construction and Building Trades Up 3,730 or 124% Textiles, Printing and other Skilled Trades Up 425 or 63% Transport and Mobile Machine Drivers and operatives Up 2,870 or 88% Elementary Trades, Plant & Storage related occupations Up 5,745 or 43% Elementary Administration and Service occupations Up 3,925 or 74% Skilled Trades Personal Service occupations Sales and customer service occupations Process, plant and machine operatives, drivers Elementary occupations Associate, Professional & Technical Professional occupations Managers & Senior Officials Administrative and Secretarial Click back to navigation page Office for National Statistics. Figures not seasonally adjusted. Broadly, JSA started increasing In early 2008 and had a recent peak in early 2010 so the above analysis roughly covers JSA pre-recession trough to recent peak i.e. change from Feb’08 to Feb’10