Why the lowest unemployment in five years isn't all it seems

Alright, so unemployment has fallen to 6.8% - but that was partly driven by the huge number of people who registered as self employed.

by Emma Haslett
Last Updated: 11 Jun 2014

Unemployment dropped to 6.8% in the three months to March, from 6.9% in February. That means the number of people out of work in the UK is 2.2 million, its lowest level in five years.

So the number of ‘forward guidance’ critics pointing and laughing at Mark Carney is, presumably, higher than it was last month: lest we forget, last summer the Bank of England governor said unemployment wouldn’t fall below 7% until at least 2015, and therefore decided that when it did happen, interest rates could rise.

Then, a couple of months later, he was forced to scrap his plans because unemployment was falling too fast. It actually dipped below 7% in February. Which just goes to show that even the best economic forecasts can sometimes prove to be as reliable as crystal ball gazing.  

We digress: the number of people in employment rose to 30.43 million in March, the highest figure since records began in 1971, while 283,000 people found jobs (which is, you guessed it, the highest quarterly increase since 1971).

Pleasingly, the number of 16-24-year-olds in work has finally begun to creep up: unemployment among that group, which suffered particularly badly during the recession, dropped by 48,000 to 868,000, its lowest figure for five years.

It’s definitely good news, but how good is debatable: that ‘number of people in work’ figure was pushed up by a rise in the number of people registering as self employed, which rose by 183,000 to 4.5 million in the three months to March. Although many of those who registered did it voluntarily, there will always be a certain portion were forced into freelancing as a last resort.

There is also the question of earnings, which rose by just 1.7% in the three months to March. Alright, so inflation is now down to 1.6%, meaning wages are rising faster than prices – but only by a whisker. It’s not much to write home about.

So although the unemployment figure is impressive, blah blah blah, there are still indications that everything isn’t peachy quite yet.

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