1. The economy in Wales: position and implications Jonathan Price Chief Economist Welsh Government

2. Latest position and prospects

3. Recessions compared:

4. Latest labour market position (changes):

5. Latest labour market position (levels):

6. Longer-run labour market position:

7. Labour market trends (1) –Wales is maintaining an employment rate well above its historical average, with the level up just under 150,000 since the start of the Assembly (146,000 in latest data); –Perhaps up to one-third of this is accounted for by net in-migration; –Employment in Wales has increased by around 12% since devolution, compared to around 9% increase for the UK; –Since devolution the economic inactivity rate in Wales has fallen by 3.4 percentage points, compared to a fall of 0.9 percentage points for the UK as a whole over the same period.

8. Labour market trends (2) –Since 1999 employment in the private sector in Wales has increased by 96,000, whilst the public sector has increased 12,000 (last full year) –Between 2001 and the year to June 2012 employment in the top three occupations has increased by 162,600, which is more that the overall increase in employment. –The large majority of the rise in employment has been amongst the over 50s. …..BUT unemployment / inactivity is currently much too high – and prospects for the next few years are not good.

9. Projections of potential output (update due late November will probably show further deterioration):

10. Risk from Eurozone: Latest forecast Source: European Commission – Economic Forecast Autumn 2012 ….and additional risks from USA “fiscal cliff”.

11. Medium to longer term performance in UK context

12. Welsh relative economic performance: a summary

13. What makes Wales “different”? Skills / qualifications (especially at the bottom end) Lack of major city / cities (“agglomeration”) Demography (more non-working elderly)

15. Individual and family characteristics are more important for people’s outcomes than geography – eg employment rates link more strongly to qualification levels than to area:

16. Welsh economic performance in UK context partly reflects qualifications mix: Qualifications of working age population (2011)

17. International context reinforces story: Wales (and indeed UK) has a long tail of people with low qualification levels:

19. Incorporating “material deprivation” reflects lasting poverty, and highlights the protective effect of employment (1): Note also impact of employment on well-being……

20. Impact of unemployment on well-being: Estimated Effect of Life Event on Life Satisfaction by Year Clark, A., Diener, E., Georgellis, Y. and Lucas, R. (2008), "Lags and leads in life satisfaction: A test of the baseline hypothesis", Economic Journal

21. Long run impact of lack of employment on young: Long term disconnection from employment or education leads to lasting scars on wages, employment and health & well-being. Effect on outcomes in later life from each year NEET 16-24 Source: Gregg, University of Bath

22. Importance of cities in regional economies Wales ranked bottom in UK

25. Key messages Slow and halting recovery Labour market performing better than expected But unemployment too high, and still big risks ahead Lack of employment matters – not just for economic performance…. …but (more importantly) for avoiding poverty, for health, for general well-being, and for children’s prospects. In-work poverty exists, but is focused on families which contain adults working less than full time (or self- employed) Long run action to increase employment must include action to improve skills, particularly at the “bottom end” There are other things that can be done as well, but no panaceas.