Private sector boosts employment - but claimant count still rises

The benefit bill rises, despite the biggest quarterly rise in employment since records began. A sign of things to come?

by James Taylor
Last Updated: 19 Aug 2013
The latest unemployment figures are out, and there's been a slight improvement: a drop of 8,000 in the 2.47m in the three months to July. Better still for the Government, there's been a huge, private sector-driven rise in the number of people in work: this was up 286,000, the biggest quarterly rise since records began in 1971. Sadly, this was about as good as the news got. A rise in part-time working accounted for much of this jump. And the number of people claiming unemployment benefit actually increased in August - even before the Government’s spending cuts take a big chunk out of the public sector...

The Government’s theory is that trimming back the public sector and reducing business taxation and regulation will free up a wave of private sector growth and job creation over the next few years. It's a nice idea, and at first glance the impressive employment growth in the months after the Coalition took the reins suggests they may have a point. But while there was undoubtedly a bit of optimism generated by the new broom(s) in Westminster, the ONS points out that a rise in part-time working constituted much of this hike. And if three students, working part-time, are doing a job that was previously filled by a full-time employee, we’re not exactly any better off than before – worse, if anything.

Perhaps the more salient figure was that surprise increase in the claimant count, which was up 2,300 to 1.47m. Employment Minister Chris Grayling was also keen to flag that nearly 5m people are now claiming the three main out-of-work benefits - proof, he says, that 'the system the Government inherited is failing to get people on welfare into jobs'. It seems odd that a minister can try to make political capital out of a rise in the claimant count, but the Coalition is still just about able to blame everything on the last lot. Unfortunately for them, that won't last forever.

We'll have to wait and see how aggressive the Coalition is with its October spending review; it may be that they're softening us up so the end result won't seem so bad (the likes of the CIPD are encouraging them to back-load any job losses). But either way, it seems inevitable that unemployment will rise in the coming months as the civil service cuts kick in. However successful private sector job creation is - and there's an argument that a lack of consumer spending is going to be a major check on growth across the board - it's unlikely to be able to pick up that much slack, at least in the short term.

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