UK unemployment falls (but not by much)

The Office for National Statistics today revealed that the number of people out of work in the UK has fallen by 46,000.

by Michael Northcott
Last Updated: 19 Aug 2013

Whilst troubles continue to brew and froth in the eurozone, a tiny nugget of good news here in the UK: unemployment has fallen to 2.56 million people in the three months to the end of June. The rate of unemployment as a percentage has fallen to 8% from 8.2% in the previous quarter – the lowest level in almost a year. The figures, released by the ONS this morning, show that the number of people in the dole queue fell by 5,900, too, to 1.6 million in July. 

With the UK still firmly in its double-dip recession and the situation across the Channel worsening yet again, why is unemployment falling? Well, some analysts argue that the figures can partly be attributed to the Olympics. Employers created around 130,000 full-time jobs during the quarter with a particularly concentrated increase in London, suggesting a hiring spree in anticipation of an economic boost in London. 

But many are sceptical about the long-term effects such a boost. Jim Hillage, director of research at the Institute of Employment Studies, described the Olympics as having ‘cast a golden glow’ on the labour market, but expressed doubts that the effect would filter down to the wider economy. He said: ‘While this is undoubtedly good news, the latest labour markets statistics do raise questions about why they seem so out of kilter with other recent economic data.’ Stuart Baird, the founder of small business investor Stone Ventures, added: ‘More proof came [today] that we are in the realm of the economic absurd. How can unemployment fall and employment rise while everything else in the economy points to contraction? Paradox and contradiction are driving elements of the new global order.’

The data certainly paint a confusing picture. A contraction of 0.7% in GDP, falling exports, an uptick in inflation and a seriously faltering construction sector all make it seem strange the unemployment could simultaneously be falling. Even the governor of the Bank of England Mervyn King has hinted that the folks at Threadneedle Street don’t know what the heck is going on, either. One theory is that employers are hanging on to staff that they don't necessarily need, making sure they are not caught short if the economic upturn ever come. The question is how long they will be able to carry on doing that...

Still, it’s safe to say the figures remain less than ideal. Youth unemployment remains above 1 million, and the BoE cannot see any net growth whatever for 2012, in its crystal ball. Here’s hoping that falling unemployment means the economy is spluttering back to life, but with such conflicting data, maybe we’ll all just be sucked into a vortex instead…

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