Last week's labour market statistics contained some good news about the manufacturing sector.
- Workforce jobs in manufacturing rose 0.3% in the third quarter
- Jobs in the sector have increased every quarter for a year
- In the three months to September there were 2,596,000 people working in the sector, compared with 2,521,000 the year earlier
This was the first annual rise in manufacturing employment since 1998. But over that same period output in manufacturing fell by nearly 1%, and productivity (measured as output per hour worked) has been falling in recent quarters. So what's happening with employment?
There are a few possible reasons for the increases:
Manufacturers are taking on apprentices to prepare for future growth
Skills shortages are a long term issue facing manufacturers, but companies are taking steps to address this by training up apprentices. Recent EEF research showed that two thirds of manufacturers offer apprenticeships.
Statistics from the data service show that in 2011/12 compared with 2010/11 there were over 8,000 additional apprentices in engineering and manufacturing technology.
Apprenticeships are a long term investment for companies, and increased numbers suggest that manufacturers are preparing for growth opportunities in the long term, rather than focusing on the current weak demand environment
Manufacturers are hiring people instead of investing
The weak demand environment will be impacting some manufacturers' decisions however. For example, companies that want to increase production may choose to hire new employees instead of investing in capital equipment. This may go some way to explaining recent falls in productivity in the sector.
Anecdotal evidence would suggest that hiring people is also part adapting to a lower-demand environment, for example, some companies have hired additional sales people to help them expand into new markets.
Manufacturers are making agency workers permanent
This is something of a statistical quirk. Agency workers are not counted as working in the manufacturing sector, because they are on agency payrolls. When manufacturers take these workers on as permanent employees on the company's payroll they are then counted as sitting in manufacturing jobs. Anecdotally, we have heard from companies who have done this in the past year.
This may mean that some of the recently reported falls in productivity in the sector are slightly overstated.