Unemployment falls - but for how long?

Happily, the unemployment rate fell to 7.7% in the first quarter. But the more timely claimant count figure tells a slightly different story...

by James Taylor
Last Updated: 19 Aug 2013
Unemployment fell to 2.46m in the first three months of 2011, a rate of 7.7%, the Office for National Statistics said today. That has to be seen as good news, particularly if it implies that the provisional estimates of Q1 GDP growth (or the lack thereof) may have been pessimistic. However, the jump in the number of people claiming Jobseekers' Allowance in April - to 1.47m - is slightly alarming, particularly since we haven't seen the worst of the public sector cuts yet. And that's without mentioning the ongoing squeeze on take-home pay...

All told, an extra 416,000 people are in work compared to the same period in 2010, which suggests that things are certainly moving in the right direction - including an extra 205,000 in full-time employment. This seems slightly odd, given that the latest estimates suggest GDP growth has basically been flat for the last six months - as the CIPD points out, if we're creating jobs without growth, that suggests productivity is falling, which doesn't really bode well. But glass-half-full types will hope this just means that the initial GDP estimates may yet be revised up.

On the other hand, if you use the previous year, i.e. 2009, as your point of comparison, the current situation looks a little less healthy: full-time working is down by 1.4%, while part-time working is up by 5%. So it looks as though one of the reasons why employment hasn't fallen further is that more people have (not necessarily by choice) taken part-time jobs.

Equally, that April claimant count may also suggest that the fall in unemployment during Q1 was just a blip; that things might look a lot less healthy once the public sector redundancies kick in. And when that happens, it might be particularly bad news for women - the number of whom on the dole is already at a 15-year high (and relatively few seem to have benefited from the fall in unemployment between January and March). The number of people unemployed for more than a year also rose by 20,000 to 850,000 - and that's one of the most difficult trends to reverse.

The other notable point today was that underlying earnings rose at an annualised rate of just 1.8% year-on-year in March - proving that high inflation isn't feeding through to wage settlements. That's good news for the Bank of England, since it reduces the pressure on them to hike interest rates. And it helps employers to put up with lower productivity, as the CIPD points out. But it means even those still in work will be feeling a lot poorer.

 

Unemployment falls - but for how long?

 

Happily, the unemployment rate fell to 7.7% in the first quarter. But the more timely claimant count figure tells a slightly different story…

 

Unemployment fell to 2.46m in the first three months of 2011, a rate of 7.7%, the Office for National Statistics said today. That has to be seen as good news, particularly if it implies that the provisional estimates of Q1 GDP growth (or the lack thereof) may have been pessimistic. However, the jump in the number of people claiming Jobseekers' Allowance in April - to 1.47m - is slightly alarming, particularly since we haven't seen the worst of the public sector cuts yet. And that's without mentioning the ongoing squeeze on take-home pay...

 

All told, an extra 416,000 people are in work compared to the same period in 2010, which suggests that things are certainly moving in the right direction - including an extra 205,000 in full-time employment. This seems slightly odd, given that the latest estimates suggest GDP growth has basically been flat for the last six months - as the CIPD points out, if we're creating jobs without growth, that suggests productivity is falling, which doesn't really bode well. But glass-half-full types will hope this just means that the initial GDP estimates may yet be revised up.

 

On the other hand, if you use the previous year, i.e. 2009, as your point of comparison, the current situation looks a little less healthy: full-time working is down by 1.4%, while part-time working is up by 5%. So it looks as though one of the reasons why employment hasn't fallen further is that more people have (not necessarily by choice) taken part-time jobs.

 

Equally, that April claimant count may also suggest that the fall in unemployment during Q1 was just a blip; that things might look a lot less healthy once the public sector redundancies kick in. And when that happens, it might be particularly bad news for women - the number of whom on the dole is already at a 15-year high (and relatively few seem to have benefited from the fall in unemployment between January and March). The number of people unemployed for more than a year also rose by 20,000 to 850,000 - and that's one of the most difficult trends to reverse.

 

The other notable point today was that underlying earnings rose at an annualised rate of just 1.8% year-on-year in March - proving that high inflation isn't feeding through to wage settlements. That's good news for the Bank of England, since it reduces the pressure on them to hike interest rates. And it helps employers to put up with lower productivity, as the CIPD points out. But it means even those still in work will be feeling a lot poorer.

 

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