Making sense of unemployment statistics

As the Olympics fade, a fall in unemployment is good news for government ministers desperate to hang onto any feel good factor – yet it’s difficult to reconcile, or believe the validity of such a claim, when economic reality appears so different. In particular, these figures cover a three month period between April and June when the economy continued to contract – this time by 0.7% – and come at a time when the Euro Zone as a whole is now also moving into recession.

The authoritative Labour Market Outlook published by the Chartered Institute of Personnel and Development www.cipd.co.uk/labourmarketoutlook  shows employers continuing to hang onto staff with specific skills despite the downturn. As CIPD explains, this results in a significant degree of over-capacity and is one reason why productivity (output per worker) continues to decrease.  This shows the importance of skills learnt ‘on the job’; but is unsustainable in the longer term – unless there is a general increase in confidence about the future.  If employers do have to make these sorts of redundancies they also reduce the overall productive capacity of the economy – dampening longer term growth.

It’s increasingly the case that official employment statistics now no longer reflect the sort of work that people are now forced to take on and the conditions under which they do it. The 46000 fall in joblessness is largely the result of a rise in employment London – the Olympic effect; but it’s also tempered by figures showing that over half of new jobs created have been part-time (8.07 million now fit this category) and the number of people working part-time because they can’t find a full-time job having increased by 16 000 to reach 1.42 million –the highest ever.  As BBC’s Newsnight also recently pointed out  www.bbc.co.uk/news/uk-19263787  160 000 people now work on ‘zero hours’ contracts where work is dependent on employer need and where  the absence of work results in a ‘day off’ rather than being regarded as unemployed.

ONS figures show unemployment for 16-24 year olds falling by 4 thousand (from 21.8% to 21.5%) but this figure is distorted by including full-time students also active in the labour market.  For young people not in full-time education, unemployment has risen by 1.2% to over 1 in 5 and there’s also been a significant increase in ‘economic inactivity’ – a category that includes those who’ve   simply given up looking for employment.

So, Ian Duncan-Smith’s comments about the figures being ‘positive and encouraging’ are based on hot-air with many commentators forecasting that the labour market, whichever way  its characteristics are assessed, will  continue to worsen through the remainder of 2012.