Unemployment: why it really is good news
New Labour Force Survey figures out today have given the government some reasons to be cheerful, on the face of it.
Unemployment is down and employment is at a record high, even as the economy continues to flatline in terms of growth.
This is a strange situation which is perplexing economists and has led some readers to question the veracity of the new job figures.
Readers have contacted us on Twitter asking us to look at whether the government is in fact cooking the books.
Today’s figures from the Office for National Statistics (ONS) are a mixed bag, but the overall picture is positive.
There were 29.73 million over-16s in work between October and December 2012. That’s 154,000 more people than in the previous quarter and the highest total since records began in 1971.
At the same time, unemployment, measured both by the Labour Force Survey and by the alternative measure of claimant count (the number of people claiming Jobseekers Allowance), has fallen.
It’s not all good news. Youth unemployment is up slightly and edging towards 1 million. And there has been a real-terms cut in pay. Wages have been growing more slowly than inflation since 2008.
But these points are not what is concerning some of our Twitter followers. They want to know whether the government is reclassifying people who are on various welfare-to-work initiatives as employed, when they are not really working.
Another accusation is that the Department of Work and Pensions is stopping benefits payments to large numbers of people who break the rules for jobseekers, and those people are also excluded from the jobless figures.
And there are questions on the quality of the new jobs that are showing up in the statistics. How much of the increase in employment is due to rises in part-time work and self-employment?
The Work Programme
A common accusation is that jobseekers who have been put on unpaid work experience schemes through the Work Programme, like the infamous students stacking shelves at Poundland, don’t show up in the jobless figures.
There’s some evidence for that in the ONS stats. People classified as taking part in “government-supported training and employment programmes” are counted as employed.
Long-term, the numbers have gone up dramatically. There were 163,000 people in this category in the last quarter, a 73 per cent increase (69,000 people) on the same quarter in 2011.
But the latest number is now actually down slightly on the previous quarter: 163,000 is 3,000 less than July to September 2012.
So the inclusion of people on government training schemes in the employment figures is something worth keeping an eye on – but the latest figures don’t suggest the government are relying on it to massage current unemployment rate.
It would appear that claimants are being sanctioned – having part or all of their benefits stopped – in greater numbers under this government, as DWP answers to Freedom of Information requests have shown.
But as for the accusation that people who are under sanction don’t show up in the claimant count measure of unemployment, DWP tells us that is simply untrue.
In any event, these people would still be counted as unemployed in the Labour Force Survey figures.
Again, the long-term and short-term trends are different.
In 2008 there was a massive drop in part-time employment and a rise in the number of people working part-time. And we haven’t bounced back yet.
The latest figures for full-time employment are still 378,000 lower than in the first quarter of the recession.
But things have improved recently. In the last quarter there were 190,000 more people working part-time and 394,000 full-time workers.
The number of self-employed people has increased by 25,000 to reach 4.2m. Again, as a long-term shift in the balance of the economy, this is potentially cause for concern.
But Ian Brinkley, director the leading Work Foundation think-tank, told us to be wary of assuming that the trend is necessarily indicative of a weak economy.
Some of the rise can be attributed to traditional ‘distress’ self-employment, where workers in industries like construction are forced to go self-employed due to lack of jobs, he said.
But the last few decades have also seen an increase in blue-collar professionals choosing to go self-employed for reasons other than job market pressure.
This is borne out by today’s figures, which show that the biggest rise is among “professional occupations” and self-employment among “skilled trades” has fallen slightly.
Some scepticism is justified when looking at employment figures, if only because successive governments have shown themselves willing and able to massage them shamelessly in the past.
In the 1980s, the Conservatives were widely accused of shifting unemployed people on to sickness benefits to keep the real jobless total artificially low.
And the last Labour government used to move young people off benefits just before they counted as long-term unemployed, keeping tens of thousands of teens out of the jobless statistics. DWP has now stopped that practice.
But while there is some room for duplicity in the current system, certainly around the employment status of people put on to Work Programme training schemes, there’s no evidence that massive numbers of workless people have been excluded from today’s numbers.
Mr Brinkley, a former chief economist at the TUC, told us: “ONS figures are compiled according to international standards. You can’t really accuse the government of cooking the books. These things can’t add up to enough to seriously distort these numbers.”
If the stats are reliable, that means we are faced with a conundrum: employment is on the up but wages are falling in real terms and overall output is flat.
The Work Foundation thinks the basic answer is that Labour has never been cheaper, and it’s cheaper for firms to hire staff than it is to invest in capital projects, thanks to the high costs of borrowing.
So it makes more sense for a car manufacturer to keep production up by taking on more hands than by investing in a new line of robots.
Mr Brinkley stressed that we are in uncharted territory here, but similarly buoyant employment figures in other recession-hit countries like Germany suggest the flexibility of job markets is helping us stave off mass unemployment.
By Patrick Worrall