The truth about Britain’s employment figures

Today’s employment numbers seemed to confuse a good many people.

How, they ask, can employment be going up so fast in a recession? (The number of people in work went up by 236,000 in the three months to July, leaving the number of people employed in the UK a mere 1,000 short of our all-time high.)

And if employment is rising so fast, how come unemployment isn’t coming down faster? (The number of the unemployed fell by a mere 7,000 in the same period. )

The answers are more straightforward than you might think.

First, unemployment. It isn’t going down as fast as it would otherwise for the simple reason that more people are entering the workforce. Andrew Sissons points out that 90,000 new people started looking for work over the quarter. Large numbers of students, retirees (presumably quantitative easing  has played havoc with their retirement incomes) and those on long term sick leave are returning to the workforce, something that prevents the unemployment number falling even as the employment number rises. 

And as for how so many people can find work in a recession, the first thing to note is that we might not be in a recession. The GDP numbers are endlessly revised, and very few of the other statistics out in the last few months back up the idea that the economy is actually contracting at the moment. It clearly isn’t booming (and isn’t going to for some time to come), but it probably isn’t shrinking either.

The second thing to note is that it is perfectly possibly for more people to be employed and for the total number of hours worked across the economy to be up (14.3 million hours more than in the relevant quarter last year) but output in GDP terms to flatline or fall (see my previous blogs on this subject here). So it isn’t inconsistent for the levels of inactivity to be at their lowest since 1991 but for the economy to be mildly contracting at the same time.

The third, that while we can’t see precisely what the jobs are, they don’t look to be the kind of jobs you see in boom times. 91,000 of them were in London, and while a good many of those are surely long-term jobs, others will have been Olympic related. A large number of the newly employed have also either employed themselves (not something most people do by choice) or gone part time (the number of people forced to work part time when they want a full time job is at a new high).

There might also be something else going on. There is huge underemployment. It is also worth noting that once again real wages are falling and, worryingly, that the number of people who have been unemployed for over a year has risen to 904,000.

The thing to remember when you look at all these numbers is that the deleveraging process that we are having to go through at the moment – by which we give up the bubble growth of the pre 2007 years – doesn’t have to be dramatic.

Daniel Hannan writes here about the “slow, wretched” decline he expects in the eurozone as the peripheral economies deal with their debts. He might be a more miserable than is warranted, but dig into our stats and perhaps something similar is happening here.

Our employment numbers look fine; good, even. But if they reflect not full time jobs in dynamic industries but hordes of desperate pensioners and women taking whatever work they can at falling real wage levels, they don’t necessarily tell us things are improving as we would like them too.