Employment in London - Forecasts

1. Employment in London - Forecasts Bridget Rosewell

2. Background • Provide a medium term outlook over 15 years • Take into account structural shifts • Avoid need to forecast uncertain drivers

3. 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

4. Employment Output Relationship

5. 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

6. 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)

7. 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

10. 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

12. 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%

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

15. 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

16. -4.60 2000 1996 -4.65 -4.70 1991 1985 -4.75 Log of business services employment divided by real London GVA £mn -4.80 1971 -4.85 1980 -4.90 1976 1970 1975 1980 1985 1990 1995 2000 Business Services Trends Business services employment (log) as a proportion of total London GVA 1971 - 2000

19. SDS Employment Forecast

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

21. Long Term Forecasts

22. Long term forecasts