Headline unemployment fall is good news, but underlying picture remains grim

The ‘recovery’ in the labour market over the most recent quarter has been characterised by part-time work and slowing wage growth; this is not good news.

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The headline figures from today’s Labour Market Statistics (pdf) are certainly good news, unemployment (on the broad International Labor Organization measure) fell by 35,000 whilst employment rose by 53,000.

Job-Centre-PlusBut a glance beneath the headlines reveals some worrying signs of continuing weakness in the labour market:

• The claimant count measure of unemployment (which only counts those actually claiming Jobseeker’s Allowance) rose by 3,600 in March 2012 to 1.61m, its highest since October 2009 and up 145,200 over the past year;

• Youth unemployment remained above the one million mark and the number of long term unemployed people rose by 38,000 on the quarter;

• The rise in employment was driven by a rise in part-time work, with the number of people in full-time work down by 27,000;

• There was another rise in ‘under-employment’ with an additional 89,000 people working part-time because they cannot find a full-time job;

• A record 1,400,000 people are now in this position, whilst 627,000 are currently on short term contracts but want a permanent one.

In other words the ‘recovery’ in the jobs market is being driven by part-time work and precarious employment rather than full-time, permanent positions.

There was even grimmer news on the wages front. As Graph 1 shows, total pay growth fell to just 1.1%, the weakest reading in 20 months. Normally one would expect rising employment to be accompanied by a pick-up in wage growth as the demand for labour increased.

The part-time and precarious nature of the current recovery means this is not happening. The slowing of pay growth suggests a lot of slack remains in the labour market.

Graph 1:

Earnings-inflation-and-real-wages-2010-2012
The falls in inflation since its peak last autumn should be providing a boost to household incomes and supporting consumer spending, but the slowing of wage growth means real wages (nominal earnings minus inflation) continue to fall.

Since peaking at 5.6% in September last year RPI fell to 3.7% in February, a drop of 1.9%. However during the same period earnings growth fell from 2.3% to 1.1%. So whilst real wages were falling at an annual rate of 3.3% in September they are now falling at a pace of 2.6%, better but still grim news for hard pressed households.

The large fall in inflation is not feeding through into real incomes, which face additional pressures from the changes to the tax credit system.

 


See also:

We need a firm limit on the time we are prepared to tolerate anyone being unemployed 17 Apr 2012

Latest labour market stats are encouraging, but we should remain cautious 14 Mar 2012

Encouraging news on jobs, but far too early to call a labour market recovery 7 Mar 2012


 

It is certainly good news that unemployment fell in the most recent quarter but the headline figures don’t tell the whole story. The ‘recovery’ in the labour market over the most recent quarter has been characterised by part-time work and slowing wage growth; by any reasonable measure this isn’t cause for celebration.

 


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27 Responses to “Headline unemployment fall is good news, but underlying picture remains grim”

  1. Duncan Weldon

    A part-time & precarious ‘recovery’ – me at @leftfootfwd on today’s employment stats. http://t.co/4UeJqo4P

  2. DJC

    The headline unemployment fall is good news, but the underlying picture still remains grim http://t.co/eTqy76Kf

  3. Betty

    The headline unemployment fall is good news, but the underlying picture still remains grim http://t.co/eTqy76Kf

  4. Alex Snowdon

    Is the slight dip in unemployment figures cause for cheer? Good explanation of what's really going on: http://t.co/5erX1p5n

  5. Maggie W

    Headline unemployment fall is good news, but underlying picture remains grim, writes @DuncanWeldon: http://t.co/3Td7HCVx

  6. Richard Exell

    A part-time & precarious ‘recovery’ – me at @leftfootfwd on today’s employment stats. http://t.co/4UeJqo4P

  7. Chris Dillow

    A part-time & precarious ‘recovery’ – me at @leftfootfwd on today’s employment stats. http://t.co/4UeJqo4P

  8. Wiltshire UNISON

    A part-time & precarious ‘recovery’ – me at @leftfootfwd on today’s employment stats. http://t.co/4UeJqo4P

  9. Noodlehands

    RT @leftfootfwd: Headline unemployment fall is good news, but underlying picture remains grim http://t.co/v5nkG2rt

  10. BevR

    RT @leftfootfwd: Headline unemployment fall is good news, but underlying picture remains grim http://t.co/bkrvZ8ig

  11. Mr. Sensible

    The unemployment statistics always come across as complex, but it will be interesting to see where the government goes next.

  12. BevR

    RT @leftfootfwd: Headline unemployment fall is good news, but underlying picture remains grim http://t.co/bkrvZ8ig

  13. Richard Exell

    RT @DuncanWeldon – the unemployment and employment figures are no great cause for celebration: http://t.co/g59bpEfA

  14. Barbara Keeley

    @DuncanWeldon: Employment picture "grim": Number in f/t work down 27k, 89k more in p/t work, 627k on short contracts – http://t.co/vGQsiEUQ

  15. Rick

    A part-time & precarious ‘recovery’ – me at @leftfootfwd on today’s employment stats. http://t.co/4UeJqo4P

  16. BevR

    RT @leftfootfwd: Headline unemployment fall is good news, but underlying picture remains grim http://t.co/bkrvZ8ig

  17. Look Left – Unravelling the ‘granny tax’, unemployment stats and Boris | Left Foot Forward

    […] Left Foot Forward reported on Wednesday, the stats (pdf) show worrying signs of continuing weakness in the labour market: • The claimant count measure of unemployment (which only counts those […]

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    […] See also: • Headline unemployment fall is good news, but underlying picture remains grim 18 Apr […]

  19. Samantha Ritchie

    Good to know Cameron's focusing on the things that matter, such as falling unemployment: http://t.co/rwsDfe9T #PMQs

  20. Martin Steel

    Good to know Cameron's focusing on the things that matter, such as falling unemployment: http://t.co/rwsDfe9T #PMQs

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  22. Darkest Hour

    Just did a search on the direct.gov website for jobs working as an ecologist anywhere in the UK. 55 of the 60 jobs (around 95% of the search results) were for ‘Charity Field Advisor’ positions offered by Morgan Thomas recruitment working for ‘a well-known UK charity’. Yet on the Morgan Thomas website under current jobs they only have two jobs and neither are for ‘Charity Field Advisors’. This is just one example of how the official number of vacancies in the UK economy is inflated by bogus jobs. This is done so politicians can claim their are thousands of vacancies and the unemployed aren’t trying hard enough. I wish a journalist or serious blogger would investigate this scandal because I am fed up of applying for jobs that aren’t real and my CV details being harvested by unscrupulous businesses.

  23. Unemployment: Headline figures camoflague underlying picture of weakness | Left Foot Forward

    […] See also: • Headline unemployment fall is good news, but underlying picture remains grim 18 Apr […]

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    […] employment figures that rely for their optimism on a rise in unpaid work. As Left Foot Forward pointed out in April, “the ‘recovery’ in the jobs market is being driven by part-time work and precarious […]

  25. Steve Akehurst

    @DPJHodges For one, Duncan Weldon said it earlier this year http://t.co/eJ8otFVO

  26. JohnWayne

    Morgan Thomas Recruitment is a scam. Avoid at all costs.

  27. JohnWayne

    Morgan Thomas Recruitment is a scam. Avoid at all costs.

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