Wednesday, 19 December 2012

Unemploymment down but what lies behind the numbers?

Making sense of the unemployment figures reminds me of the song about the Grand Old Duke of York: "And when they were up, they were up. And when they were down, they were down. And when they were only half way up, they were neither up nor down!"

David Cameron at PMQs today made a great deal of the statistics showing the number of people in work has increased.  Indeed, according the the Office for National Statistics (ONS),  the number of people in work increased slightly in the last quarter to 29.6 million. The increase in number of people employed compared to a year earlier is now an impressive 499,000. Unemployment is down 0.2% compared to a year ago, or 128,000.  Now it doesn't take a mathematical wizard to realise that unemployment will fall as a percentage of the workforce if you make the workforce 'bigger'. A key issue is whether the new jobs are real. More than  20% of the increased employment was accounted for by an increased number of young people on government work and training schemes. They are not 'real' jobs.

Between September 2011 and September 2012, the number of people employed in the public sector fell by 324,000 and the number of people employed in the private sector increased by 823,000. Some of this transfer from public to private is not due to new jobs but to a reclassification of the public sector. Excluding this reclassification the number employed in the public sector fell by 128,000; the number in the private sector increased by 627.000. Some of this is good news. It is odd then that this doesn't appear to be filtering down with a feel good factor for the government.

There are possibly two reasons for this lack of feel good. The first is one of scale. It remains the case that the levels of unemployment at 7.8% remain stubbornly  high by the standards of recent times. Before the banking crisis unemployment was less than 5.5%. The other problem is that it is unlikely that jobs being created in the private sector are located in just the right areas for those losing jobs in the public sector to move into.  So there is probably a discordance between those feeling the ravages of cuts and those finding work. There is evidence to suggest that at least 1/3 of the new jobs have been created in and around London as part of the Olympics bounce, whilst in many other regions, such as Yorkshire and the Midlands, unemployment has been rising and stays above 8, 9 or even 10%.  But the third reason for lack of feel good is falling incomes and rising prices of food, energy and transport.

Record numbers are working part-time because they cannot find full-time jobs with 8 million people working fewer than 25 hours a week. This means that as the real cost of living rises with increased prices of food and energy, family income is falling.  Real monthly incomes are on average £22 lower than a year ago.

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